Choosing the right motor insurance policy add-on

In India, owning a vehicle means way more than just having means of mobility. Due to the emotional value attached to it, owners also like to adequately invest in the safety of the vehicle as well as its passengers.

While one cannot, and should not, compromise on their vehicle insurance policy and should go for the most comprehensive coverage, the possibility of saving some money while doing so is also a lucrative proposition.

It may not have been possible earlier, but the Insurance Regulatory and Development Authority of India (IRDAI) had recently announced some innovative add-ons to motor insurance policies that make insurance more cost-effective as per the driver’s profile.

Also read: IRDAI permits insurers to launch motor insurance add-ons

How, you ask? With the latest add-ons, specifically three of them, you can now tailor your vehicle insurance policy as per your driving profile.
Essentially, these add-ons take into consideration how much and in what manner the vehicle is driven to arrive at the right insurance premium.

After all, insurance is about covering risk, and the amount of risk varies from one driver to another depending on how much they take the car out, and how responsibly they drive. And today, technology enables insurance companies to take such factors into account.

One of the new add-ons also lets vehicle owners get a floater insurance policy for multiple vehicles, thus saving them money. Here is everything you need to know about the choice of motor insurance add-ons as per your driving profile.

Pay as you drive
This add-on is perhaps the one which would be wholeheartedly welcomed in the post-pandemic era. During the pandemic, millions of vehicles just lay in basements, parking lots and garages as the whole world came to a screeching halt.

Yet, vehicle owners paid the insurance premiums even as the risk to their vehicles was quite limited. Even after the pandemic, several companies have allowed a remote or hybrid work culture that still limits commutes.

Moreover, there is a growing tendency to use cabs despite owning a car to avoid traffic and parking woes, etc. Since the usage is limited, the risk is lower too. So why pay the same insurance premium as before, or the same as someone who uses their vehicle regularly on a daily basis?

This is where the pay-as-you-drive add-on comes into the picture as it takes into account your driving profile and your habits and gives you the option to pay a premium based on the number of kilometres driven.

Various methods are adopted by different insurance companies to gauge the usage—a tracking device or a mobile app, to name just two. So instead of a flat rate, you can pay the insurance premium as per your actual usage.

Who should opt for this: This is a great feature for those who don’t drive their vehicle on a daily basis, but only on special occasions. Those who work from home should ideally opt for this rider. Those who have multiple cars and drive one car more than the other can opt for this option for the less-driven car.

Pay how you drive
The risk in this case is assessed not only on the basis of how much you drive but also how responsibly you drive. Someone who jumps traffic lights, drives above the speed limit and/or does not stay in his/her lane would be more prone to be in a mishap than someone who follows all rules.

Earlier, there was no possible way to incorporate this element in a motor insurance policy. However, today, technology makes it possible to peek into the driving habits of the policyholder and tap it to customise his/her insurance plan accordingly.

The good news is that the regulator has recently approved the pay-how-you-drive model, meaning a person with a proven track record along with responsible driving and rule-following habits is likely to pay a quite lower insurance premium. A GPS tracker fitted in the vehicle would be used to track and analyse one’s driving habits, backed by algorithms at the backend.

Who should opt for this: Ideally, everyone! Not only would this add-on reward policyholders for good driving habits, it would also encourage others to inculcate them.

Moreover, the policyholder can inquire about the reason if their premium is on the higher side, and work on lowering it in the next cycle by working on their shortcomings as drivers.

Also read: All about motor insurance riders 

Floater vehicle insurance policy
For those who own multiple vehicles, insurance could be a costly affair, especially if both vehicles are not in use at the same time—essentially you are driving only one vehicle but paying an insurance premium for two.

This is the case for many households where they have an SUV for outstation travel and a small car for daily use or multiple cars for different members with varied usage. Not to mention, most people have a two-wheeler along with their car.

IRDAI has now made it possible to purchase a floater policy that covers your multiple vehicles instead of maintaining multiple mutually exclusive insurance policies. This floater policy brings down the premium cost by extending the same policy to other vehicles owned by the policyholder, even to two-wheelers.