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Apr 5, 2021

Usage Based Motor Insurance: Pay As You Drive Policy

The Covid-19 pandemic has made us conservative with spending. It applies to almost every aspect of our lives. Things that we do not require immediately are being deferred to a future date. Moreover, the spending habits have shifted from being luxury-focused being focussed on essentials only.   That said, spending on a motor insurance policy is mandatory and thus cannot be neglected. With a limited need to go outdoors, a motor insurance policy seems like an additional expenditure. But perils like theft and fires can occur even when the vehicle is stationary. To protect against such uncertain events, an insurance policy is necessary.   What is Usage-Based Insurance?  Usage-Based Insurance or UBI is a kind of short term car insurance wherein the payable premium for the policy is directly linked with the usage of the insured vehicle/product. It is also known as Telematics insurance, and it has been introduced through the regulatory sandbox route.   What is Telematics? Telematics is a mix of telecommunications and informatics - it is used to keep track of driving-related data, including storage and transfer of that information. In the auto insurance industry, this data is essential to gain an understanding of driving behaviour and gauge the appropriate vehicle insurance rate.   Usage-based insurance has been widespread in developed countries, but now is introduced in India as well. According to reports, the Insurance Regulatory and Development Authority of India (IRDAI) supports the idea of a usage-based motor insurance policy. Bajaj Allianz General Insurance has introduced such plans considering the needs of the users.   How does a usage-based car insurance policy work?  When you purchase this type of policy, you need to pay a motor insurance premium for a pre-specified number of kilometres. In case you cross this predefined distance, you can renew it with additional kilometres. You must note, availing a usage-based plan will require you to frequently top-up if there is a rise in the use of your vehicle.   What are the benefits of usage-based car insurance? Being a short term car insurance, the benefits from these plans are as follows-   Lower Premiums: Since the policy is valid for a specified number of kilometres, the premiums will be lower than standard plans with own-damage cover. Vigilant drivers will be able to save a lot using these types of insurance policies. Also, those who use their vehicles infrequently will be able to take advantage of such lower premiums while remaining compliant with regulatory norms.   Better road safety: Telematics makes use of devices that help in tracking driving habits. The installation of the device is included under your policy and can help the insured as well as the insurance company to monitor driving habits. Using these monitoring tools, it can help in increasing road safety for you as well as other cars. Also, using this data, the insurance company can recommend better plans which offer a comprehensive cover depending on usage.   Additional features: Usage-based motor insurance policies can be enhanced with required add-ons. Making use of additional coverage options, a policyholder can ensure complete protection for their vehicle.   In conclusion, usage-based motor insurance policy is the next big thing in the insurance industry. It offers affordable options to the buyers while maintaining a comprehensive insurance cover for your motor vehicle based on its use.  

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