PAYD Insurance Cuts Premiums Up to 30% for Low-Mileage Drivers
Pay As You Drive car insurance ties own-damage premiums to annual distance, offering up to 30% savings for drivers under 10,000 km. Mileage limits require monitoring.
Pay As You Drive (PAYD) car insurance can cut own-damage premiums by up to 30% for drivers who cover less than 10,000 km annually, according to insurers marketing the usage-based add-on.
The PAYD add-on links a portion of the own-damage premium to the distance driven. Policyholders declare their current odometer reading at purchase and choose a kilometre slab starting at 2,500 km, adjustable in multiples of 1,000 km. Insurers allow a grace distance of up to 125 km per year. Unused distance can be carried forward to the next policy.
“One of the biggest advantages of PAYD is that it rewards lower vehicle usage without compromising on protection,” said Aditya Kumar, Motor Underwriting Head at Digit Insurance. “Drivers continue to enjoy the benefits of their existing motor insurance coverage while potentially paying a lower own-damage premium.”
The product targets specific driver segments. “Work-from-home and hybrid working models have reduced daily commutes for many professionals,” Kumar said. “Retirees and residents of cities with strong public transportation networks may also fall into this category.”
HDFC ERGO General Insurance, in an explainer on PAYD, said cash savings are a key benefit: drivers who cover less than the average car owner will pay less than average for a premium. The insurer cautioned that the discount can disappear if mileage exceeds the chosen limit. “Extensive use can result in higher premiums or even penalties, cancelling out the cost savings you realised at first,” HDFC ERGO said.
Policyholders must monitor their odometer and buy a top-up slab before exhausting the limit to avoid losing coverage. If the km limit runs out, the insurance protection lapses. The product remains niche in India; several insurers do not offer it, and availability depends on location and company-specific terms.
Kumar said PAYD works best “for those with predictable, low-distance driving habits. Frequent long-distance commuters or regular highway travellers may find traditional insurance plans more suitable.”
Indicative discounts range from 25% to 40% of the regular own-damage premium for the 2,500 km slab, according to the HDFC ERGO explainer. The exact percentage varies by insurer, vehicle type, and policy terms. Drivers should assess their annual mileage carefully by reviewing past odometer readings before selecting a plan.
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