Pay As You Drive car insurance

In Australia, Pay As You Drive (also known as Pay As You Go, Low Kilometre insurance and Drive Less Pay Less) has all the benefits of a comprehensive policy, but your premium is determined by the distance you believe you will travel in the next 12 months. This offers a more flexible option to customers, especially if you drive less than the average driver, don’t drive frequently or don’t have many long trips.

The specifics of the policy and the number of kilometres you can choose may vary between providers. Check the relevant Product Disclosure Statement (PDS) for the full details of the inclusions, exclusions and limits to your policy. Read the Target Market Determination (TMD) to see if a policy may be right for you.

When choosing a Pay As You Drive (PAYD) your premium will be based on your nominated amount of kilometres you plan to drive in a 12-month period (i.e. 15,000km per year). If you drive more than this, a Pay As You Drive policy may not be suitable for your needs.

When starting a new policy, driver’s will provide their insurer with their odometer reading, and will be required to provide follow-up readings, typically either monthly or at the end of their policy. It’s important to track your odometer through-out the year in order to stay below your estimated annual mileage. If you think you may exceed it, contact your insurer about extending your estimated end odometer reading or estimated total kilometres (though be aware this may increase your premium).

Always be honest about your odometer reading, or you risk not being covered if you need to claim.

Whether or not Pay As You Drive is worth it over other car insurance options will depend on your specific circumstances and how often and how far you drive your car. Here’s a look at the pros and cons of Pay As You Drive to give you an idea of whether it may be suitable for you.

PAYD policies may be best suited to people who aren’t frequent drivers and don’t need to regularly commute large distances by driving. You might consider a PAYD policy if you:

• Take public transport to work and only drive on weekends
• Are a retiree who doesn’t drive a lot
• Work from home and don’t need to drive much
• Have multiple cars and drive one more than the other.

Pay As You Drive policies often have lower premiums than standard comprehensive car insurance policies. Driving fewer kilometres than the average Australian driver means you spend less time on the road and are less likely to be in an accident. Your insurance provider will consider this risk when calculating your car insurance premium, which is why PAYD policies may be cheaper.

However, it’s important never to falsify your start odometer reading. If you need to claim and your odometer is below what you listed as your start odometer reading, your insurer may require you to pay an additional excess to be covered, or even reject your claim.

You will also need to pay an additional excess when claiming if you go over the end odometer reading or drive further than you anticipated. In these cases, your policy may end up being more expensive than standard comprehensive cover.

Yes, you can typically still choose to add extras cover to your PAYD policy, just be aware that this will increase the cost of your premium. Optional extras and services available might include:

• Roadside assistance
• Excess free windscreen cover
• Hire car cover.

Although the names sound different, Low KM car insurance and Pay As You Drive policies are essentially the same thing. Another name for this type of policy is also Drive Less Pay Less car insurance. Generally, under any of these terms you will have a policy with a set number of kilometres you expect to drive during the 12-month period of insurance.

Pay per KM car insurance varies from a Pay As You Drive policy. When you sign up for a pay per kilometre policy, you will typically pay an upfront cost that covers your car while it’s parked. Then you need to install a telematics device in your car that will track the exact number of kilometres you drive by linking to an app on your phone.