Cover Drive

Usage-driven motor insurance policies offer several benefits

- NACHIKET KELKAR

Looking to buy a new car insurance policy or renewing your existing one? The master circular issued by the Insurance Regulatory and Development Authority of India (IRDAI) in June had some important guidelines that will help you.

IRDAI asked insurance companies to offer two options as first choice under motor insurance. One of the options was 'pay-as-youdrive' insurance cover.

As the name suggests, you pay premium on the motor insurance based on how much or how you drive rather than paying a flat fee. This is a comprehensive own-damage plus third-party motor insurance policy. The third party premium will continue to be determined by existing rules, but the own-damage premium is based on the number of kilometres that you drive. So, if you drive less, you pay less.

A few companies now offer this as an add-on cover. For instance, if you are driving less than 10,000km a year, HDFC Ergo lets you claim benefit up to 25 per cent of the basic own damage premium at the end of the policy year. When the policy expires, subject to providing distance travelled, one can claim the benefit.

Some companies also offer the 'pay-how-you-drive' option, where the premium is calculated based on how you drive your car. The safer you drive, the lower will be the premium.