Car Insurance Guide: Pay As You Drive, Engine Protection & Add-on Benefits (2025)

 Car insurance in India is evolving rapidly with smarter and more customer-focused options like Pay As You Drive Insurance , Engine Protection Cover, and other valuable add-on benefits. These innovative solutions help policyholders save money, enhance coverage, and ensure complete peace of mind on the road.

In this comprehensive guide, we’ll explain what these options mean, why they matter, and how they can protect you financially in the event of an accident, damage, or unforeseen event.

Understanding Car Insurance in India

Before diving into advanced features, let’s begin with the basics. Car insurance is a legal requirement in India under the Motor Vehicles Act, 1988. Every car owner must have at least a third-party liability insurance policy to drive legally. However, most people opt for comprehensive car insurance because it provides both third-party and own-damage coverage.

  • Third-Party Insurance – Covers legal and financial liabilities if your car causes damage or injury to another person or property.
  • Comprehensive Insurance – Includes third-party cover + protection for your own vehicle in case of accidents, theft, natural calamities, fire, and man-made damages.

While a standard policy provides basic protection, add-ons like Pay As You Drive and Engine Protection offer much better coverage, ensuring your car remains protected against unexpected costs.

1. Pay As You Drive – A Smarter Way to Save on Premiums

What is Pay As You Drive Car Insurance?

Pay As You Drive (PAYD) is a new-age car insurance feature that allows you to pay insurance premiums based on the distance you drive. Unlike traditional policies where you pay a fixed premium regardless of usage, PAYD gives you control and flexibility.

This is especially useful for individuals who use their cars less frequently — for example, work-from-home employees, senior citizens, or people who own multiple vehicles.

How It Works:

  1. You estimate the number of kilometers you’ll drive in a policy year (for example, 3,000, 5,000, or 7,500 km).
  2. The insurance company calculates a reduced premium based on your chosen distance slab.
  3. If you exceed the selected distance, you can top up kilometers during the policy term.

Benefits of Pay As You Drive:

  • Lower Premiums – Save up to 20–30% if you drive less.
  • Flexible Plans – Choose coverage as per actual usage.
  • No Compromise on Protection – Full comprehensive coverage remains active.
  • Ideal for Low-Mileage Users – Great option for city dwellers, occasional drivers, or second car owners.

Example: If you drive only 4,000 km annually, why pay the same premium as someone driving 20,000 km? PAYD ensures fair pricing.

2. Engine Protection Add-On Cover

What is Engine Protection in Car Insurance?

The engine is the heart of your car, and repairing it can cost a fortune. A standard comprehensive car insurance policy usually does not cover engine damage due to oil leakage, water ingression, or hydrostatic lock.

This is where Engine Protection Cover comes in. It’s an add-on cover that ensures engine repair or replacement costs are covered, saving you from heavy out-of-pocket expenses.

What It Covers:

  • Damage to the engine or gearbox due to water ingression (common during monsoons).
  • Lubricant or coolant leakage causing internal engine damage.
  • Engine failure due to hydrostatic lock (when water enters the combustion chamber).
  • Replacement of engine and its parts, including pistons, crankshaft, gearbox, and connecting rods.

Why It Matters:

In cities like Mumbai, Chennai, or Kolkata where waterlogging is common, even a small amount of water entering the engine can lead to damages worth ₹1–2 lakh or more. Without this add-on, such costs are borne by the owner.

Benefits of Engine Protection Cover:

  • Comprehensive protection against engine damage.
  • High claim value for expensive repairs.
  • Peace of mind during monsoon or flood-prone seasons.
  • Prevents financial burden on the car owner.

Pro Tip: Opt for this add-on especially if your car is new or high-value (SUVs, luxury cars, or premium sedans).

3. Other Valuable Add-On Benefits You Should Consider

While PAYD and Engine Protection are among the most popular add-ons, there are several other add-on covers that can enhance your insurance policy and offer greater financial protection.

Zero Depreciation Cover

  • Covers the depreciation cost of car parts during claims.
  • Ensures higher claim settlement without deduction for wear and tear.
  • Recommended for cars less than 5 years old.

Roadside Assistance Cover

  • Provides emergency assistance in case of breakdowns or accidents.
  • Services include towing, flat tyre replacement, fuel delivery, jump-starting, and on-the-

 Return to Invoice Cover

  • If your car is stolen or totaled, this cover ensures you get the invoice value of the car (not just the depreciated IDV).
  • Ideal for new car owners.

Consumables Cover

  • Covers the cost of consumables like nuts, bolts, screws, engine oil, brake oil, and similar items that are usually not covered in a standard policy.

Personal Accident Cover

  • Provides financial support in case of accidental injury, disability, or death of the owner-driver.
  • Mandatory as per IRDAI guidelines.

These add-ons can be selected based on your driving habits, location, and the value of your vehicle.

4. Cost vs. Benefits – Why Add-ons Are Worth It

Many car owners hesitate to opt for add-ons thinking they increase premiums. While it’s true that add-ons cost extra, they provide high-value protection against unexpected expenses.

Add-On Cover

Average Cost/Year

Potential Savings

Pay As You Drive

Save 20–30% on premium

₹2,000–₹10,000 (depending on usage)

Engine Protection

₹1,000 – ₹2,500

₹50,000 – ₹2 lakh (engine repairs)

Zero Depreciation

₹2,000 – ₹5,000

₹10,000 – ₹80,000 (claim settlement)

Roadside Assistance

₹500 – ₹1,000

Saves towing/repair costs in emergencies

Bottom line: The small additional cost today can save you lakhs tomorrow.

5. How to Choose the Right Add-ons for Your Car

Selecting the right combination of add-ons depends on factors like your car usage, location, and budget. Here’s a quick guide:

  • Low Mileage? → Choose Pay As You Drive to save on premiums.
  • Live in a Flood-Prone Area? → Get Engine Protection Cover.
  • New or Luxury Car? → Add Zero Depreciation + Return to Invoice.
  • Frequent Long Drives? → Opt for Roadside Assistance Cover.
  • Family Safety Priority? → Take Personal Accident Cover.

Pro Tip: Don’t randomly buy all add-ons. Choose the ones that match your driving habits and risk exposure.

6. How to Buy Car Insurance with Add-ons Online

Buying or renewing your car insurance with add-ons has become fast and easy. Here’s how:

  1. Visit a trusted insurance aggregator or insurer’s website.
  2. Enter your car details – make, model, registration number, and previous policy details.
  3. Select your base policy – third-party or comprehensive.
  4. Choose your preferred add-ons like PAYD, engine protection, zero dep.
  5. Compare quotes and check claim settlement ratios.
  6. Make the payment online and get your policy instantly on email or WhatsApp.

Always read the policy wording carefully to understand inclusions, exclusions, and kilometer limits for PAYD policies.

Conclusion

Modern car insurance is no longer just about basic third-party coverage. With innovative features like Pay As You Drive and Engine Protection, car owners can enjoy affordable, flexible, and comprehensive protection tailored to their actual usage and risks.

Add-ons act like custom armor for your car, ensuring you don’t end up paying huge repair bills in the future. A smart driver is not just one who follows traffic rules but also secures their vehicle with the right insurance plan.

Remember: Choose wisely, compare plans, understand your usage, and invest in add-ons that give you maximum value.

Frequently Asked Questions

Q.1. Is Pay As You Drive suitable for everyone?

No. It’s best suited for people who drive less annually. If you drive extensively, a regular comprehensive plan may be more cost-effective.

Q.2. Does Engine Protection Cover include regular wear and tear?

No. It only covers engine damage caused by incidents like water ingression or oil leakage—not regular mechanical failures.

Q.3. Can I add or remove add-ons mid-policy?

In most cases, add-ons can be added at renewal. Some insurers allow mid-term inclusion with inspection.

Q.4. Are add-ons mandatory?

No. Add-ons are optional but recommended to enhance your coverage based on your driving habits and car’s value.

Q.5. Will Pay As You Drive affect claim settlement?

No. As long as the damage occurs within the chosen kilometer slab or after topping up, your claims are processed normally.

 

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