Pay-as-you-drive car insurance guide

By Olivia Gee ·

Every motorist and their wheels are unique, so you should be on the lookout for a car insurance policy to suit your circumstances. 

From third party car insurance to comprehensive cover, there are myriad options and extras to consider. If you want to investigate pay-as-you-drive car insurance, you’ve come to the right place. 

What is pay-as-you-drive car insurance?

It’s sometimes referred to as a ‘pay per kilometre plan’, but both titles hint at the nature of this coverage: it’s car insurance that’s priced to reflect how often or far you drive. A pay-as-you-drive plan is normally an option within a comprehensive car insurance policy.

Providers will offer a premium discount to customers who drive fewer kms, as less time on the road generally means you’re less likely to be in an accident and claim on your policy. Insurers will have different kilometre limits (either agreed upon or set) and have varied processes for measuring and altering this.

Who’s it best for? Car owners who only drive occasionally, perhaps retirees or those commuting to work via public transport or bicycle and saving the car for the weekend. It’s also handy if you have multiple shared cars in one household, limiting the km range of each.

How does pay-as-you-drive insurance work?

The standard process is to agree to drive under a certain number of kilometres in a set period – generally annually or monthly – when taking out a policy. Your odometer is recorded when you take out the coverage, and monitored monthly or at the end of the policy period.

For a ball-park figure on how far you can drive with this kind of cover, a few providers advertise a limit of 15,000km to 20,000km a year. Some insurers will allow you to bump up this limit if you anticipate extra time behind the wheel, but this usually comes with at an additional cost.

Other policy options will be more closely linked to usage. This can involve receiving further discounts rewarding lower usage on a monthly or even daily basis, while still adhering to a set limit. 

Which companies offer pay-as-you-drive insurance?

As more innovative, tech-focused car insurance companies are coming onto the market, more providers are having to compete with the flexibility they offer. So don’t be surprised if you see pay-as-you-drive or pay-per-km policies popping up more often. Some insurers offering these include:

Is pay-as-you-drive car insurance cheaper?

In short, yes. The primary selling point of this type of car insurance policy is that you receive a discount for driving less, so this will make it cheaper than standard comprehensive cover. 

However, if you exceed the kilometre range without letting your insurer know, or if you have to keep topping it up, this could end up costing you more.

As with most insurance policies, if you want optional extras included this could also make it more costly. And despite the km cost-savings, it won’t necessarily be cheaper than a third party car insurance policy, or reduce your excess at the time of a claim. 

Pay-as-you-drive pros and cons 

There’s light and shade to all things in life, including car insurance. So consider the pros and cons of pay-as-you-drive car insurance before signing onto a policy (and always read the PDS).

Pros:

  • You can get comprehensive cover at a lower price
  • You can often top up your kilometres if circumstances change
  • The discount could incentivise you to reduce unnecessary driving

Cons:

  • You have to pay an extra premium to bump up the km limit
  • Your claim might be denied or excess increased if you’ve exceeded the limit
  • You can’t set and forget this kind of policy, since kms need to be monitored

Once you’ve assessed all the details of pay-as-you-drive car insurance, check out some of the comprehensive options below.

Compare comprehensive car insurance - last updated November 28, 2020

Search promoted car insurance below. Advertiser disclosure.

  • Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes Costs Extra
    Choice of repairer
    tools icon
    Optional Extra
    Choice of excess
    coins icon
    $500 - $1,850
    Agreed or market value
    Car coin icon
    Agreed Or Market

    Available discounts

    • Online Discount Up To 15%
      Compare
    Details
  • Comprehensive Car Insurance

    Monthly premiums
    Calendar icon
    Yes
    Choice of repairer
    tools icon
    No
    Choice of excess
    coins icon
    $800 Flat Excess Fee
    Agreed or market value
    Car coin icon
    Agreed

    Available discounts

    • Temporary 30% Reduction In Premium To Help Ease COVID-19 Pressure.
      Compare
    Details
  • Comprehensive Car Insurance Policy

    Monthly premiums
    Calendar icon
    Yes Costs Extra
    Choice of repairer
    tools icon
    No
    Choice of excess
    coins icon
    $650 - $795 As A Fixed Excess; Varying Between States
    Agreed or market value
    Car coin icon
    Market

    Available discounts

        Compare
      Details
    • Price Saver Comprehensive

      Monthly premiums
      Calendar icon
      Yes Costs Extra
      Choice of repairer
      tools icon
      Optional Extra
      Choice of excess
      coins icon
      $500 - $1,850
      Agreed or market value
      Car coin icon
      Agreed Or Market

      Available discounts

      • No Claim Discount
      • Online Discount 15% Discount On First Year’s Premium When You Purchase Online
      • Restricted Drivers Discount Available
        Compare
      Details
    • Comprehensive Car Insurance

      Monthly premiums
      Calendar icon
      Yes Costs Extra
      Choice of repairer
      tools icon
      Optional Extra
      Choice of excess
      coins icon
      $400 - $2,500
      Agreed or market value
      Car coin icon
      Agreed Or Market

      Available discounts

      • 20% Discount On Contents Insurance If Youi Car Insurance Also Held
        Compare
      Details

    *Any information provided on this page should be considered a summary and general advice only. All information should be verified before purchase via the relevant Product Disclosure Statement (PDS).

    ^See information about the Mozo Experts Choice Car Insurance Awards

    Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

    While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

    Olivia Gee
    Money writer

    As one of Mozo’s money writers, Olivia Gee shares her research and insights across banking, insurance and property to help readers save. She loves getting stuck into a story, unveiling all the facts, breaking down stats and drawing on personal experiences - this is what drives her as a journalist. She has a double degree from the University of Wollongong, with a BA in Journalism as well as Media and Communications.