Do you know about usage based insurance offered by some insurance companies? If not, read on to learn more.
So, you didn’t drive your car as much last year. Maybe, you went on a business trip, or you have another vehicle that you used a lot, or you were out of the country, or some other reason. Your car spent more time in the parking lot than on the road. However, the only benefit your insurance company gave you on your insurance premium was the no-claim bonus.
Seems unfair, doesn’t it? However, if your car is not on the road, the risk of it being damaged or damaged is low. Then why pay the full amount of insurance premium? Wait, have you even looked at your premium costs from this perspective? If not, you should.
It is quite logical, if the risk is low, the premium should also be low. If you are given a bonus for not making an insurance claim, there must be some benefit to not putting your car at risk.
Now, if the above makes sense, don’t worry. Good news. The Insurance Regulatory and Development Authority of India (IRDAI) has now allowed insurance companies to introduce Usage Based Insurance (UBI) cover. For more details you can visit the official website of IRDAI.
What is UBI?
Usage Based Insurance (UBI) is a new way of calculating insurance premiums. It has two major aspects – PASU Drive (PAYD) and Pay How You Drive (PHYD). Although the concept is about a decade old in western countries, it has recently made its way to India. UBI can be availed in three different modes – PAYD, PHYD or Pay As You Go (PAYG). *
Pay While Driving (PAYD)
As the name suggests, if one opts for PAYD premium, they will need to pay an insurance premium which will be calculated based on the number of kilometers they drive or the duration of the vehicle. The insurer will use data from in-vehicle telematics to track kilometers and mileage. As mentioned earlier, the logic is simple that the less a vehicle is on the road, the less likely it is to break down. This is why it lowers the overall insurance premium. Plus, you can still enjoy the benefits of a traditional premium plan. People who own more than one vehicle, or are out of town or country can opt for this type of premium plan. *
How to Pay as You Drive (PHYD)
Pay as you go (PAYG)
This is a credit to all the “good” drivers out there. Pat yourself on the back for driving well and safely on the roads. Also for PHYD, insurers will use telematics and GPS to determine your usage patterns, driving habits, engine health, vehicle speed, and some other data points. Each driver is awarded points based on the above parameters and those points will get you a lower insurance premium. The better the score, the lower the premium you will have to pay when renewing your car insurance. Better and safer driving reduces risk. As of now, there is no penalty for impaired or speeding driving. If you are someone who follows all the rules, doesn’t break the speed limit, and takes good care of your vehicle, then this premium plan is for you. *
Simply put, PAYG is a combination of both PAYD and PHYG. With this premium plan option, you can get a double benefit. The best of both worlds. A person who rarely uses his vehicle and follows all the rules should go for a PAYG plan.
Overall, how the claim is calculated will vary from policy to policy and also based on your insurer. *
* Standard T&C’s apply
Benefits of UBI
With UBI, you will be able to get the coverage and peace of mind of your traditional insurance cover, but at a lower premium. Some of the benefits of UBI are:
- Lower premium costs
- Hassle-free claims management
- Easy recovery if the vehicle is stolen. Thanks to onboard telematics
- Promotes better driving habits.
So, next time yours Car insurance Up for renewal, consider the benefits of usage-based insurance and explore your options before purchasing your next policy. Insurance is subject to application. For more details on benefits, exclusions, limitations, terms and conditions, please read the wording of the sales brochure/policy carefully before closing the sale.