Get App
KEY POINTS
- Pay as you drive car insurance is typically designed for people who drive less than 15,000 kilometres per year.
- Your premiums will be based on the kilometres you plan to drive, and you’ll need to provide your odometer reading at the start of the policy.
- Pay as you drive insurance policies are typically cheaper than comprehensive policies from the same providers.
What is pay as you drive car insurance?
Pay as you drive car insurance provides the same features and coverage as traditional comprehensive car insurance, but you will only pay for the kilometres you plan to drive. This is different to traditional car insurance, where your premiums aren’t always affected by how far or how often you drive.
Pay as you go car insurance policies are typically designed for people who drive 15,000 kilometres or less each year.
Some providers offer specific ‘pay as you drive’ car insurance policies. But there are other ways you could save with a traditional comprehensive policy if you don’t drive very often or far. For instance, many car insurance providers may offer discounts or a reduction in premiums for drivers with low kilometres.
Compare Low km Car Insurance Discount
How does pay as you drive car insurance work?
Most insurers will ask you the number of kilometres you plan to drive each year and calculate your premium accordingly, based on your car’s odometer reading at the start of the policy. Your insurance is typically valid between your start odometer reading and your expected end odometer reading.
If you need to make a claim and your odometer reading is more than your end reading, or less than your reported start reading, you will need to pay an additional excess. You can usually apply to increase the kilometres covered, but this may increase your premium.
What is pay per kilometre car insurance?
Another similar type of insurance is pay per kilometre car insurance (or pay per km insurance). These types of policies charge you for the actual distance you drive at a per-kilometre rate, instead of being based on how many kilometres you expect to drive. The provider usually sends you a device that tracks this driving data. The further you travel per month, the more you may pay in premiums. Additionally, you may need to pay an upfront fee so your car is covered when you are not driving.
Who could benefit from a pay as you drive car insurance policy?
The flexibility of a pay as you drive car insurance policy could be particularly appealing for certain Australians, which could include:
- People who mostly use public transport to get around
- Retirees who don’t drive much
- Employees who work from home during the week
- Households with multiple cars that use some more than others
Which insurers offer pay as you drive or pay per kilometre car insurance?
Here are some of the insurers who offer pay as you drive or pay per kilometre car insurance in Australia, at the time of writing.
AHM – Pay as You Drive Insurance
- KM based on: driver estimate
- Maximum km per year: 15,000 km
Australian Seniors – Seniors Pay as You Drive Cover
- KM based on: driver estimate
- Maximum km per year: 15,000 km
Budget Direct – Gold Low KM Comprehensive Policy
- KM based on: driver estimate
- Maximum km per year: 10,000 km
Everyday Insurance (from Woolworths) – Drive Less Pay Less Insurance
- KM based on: driver estimate
- Maximum km per year: 15,000 km
Huddle – Pay As You Drive cover
- KM based on: driver estimate
- Maximum km per year: 15,000 km
Real Insurance – Pay As You Drive Insurance
- KM based on: driver estimate
- Maximum km per year: 15,000 km
Source: Canstar Research. Pay as you Drive and Pay Per Kilometre cover as specified on selected providers’ websites as at 09/05/2025. The list of providers is indicative only and non-exhaustive. Other providers may also offer Pay As You Drive or Pay Per Kilometre insurance policies.
Is a pay as you drive policy cheaper?
You will generally find a pay as you drive policy cheaper than a comprehensive policy with the same insurance provider if you don’t use your car very often. That said, you can be charged an additional excess if your odometer reading is outside the kilometre range when making a claim.
Another option is looking for a car insurance provider that offers a premium discount for drivers with low kilometres, or updating your estimated mileage and seeing if this reduces your premiums. It can be worth getting a few quotes to see which option is cheaper for your circumstances.
What does pay as you go car insurance cover?
You can generally expect pay as you drive car insurance to cover:
- Loss or damage to your car from theft, fires or accidents
- Damage to other people’s vehicles and property caused by your car
- New for old replacement (under certain conditions)
- Essential repairs to your car
- Emergency accommodation (under certain conditions)
- Hire car costs
- Lock and key replacement
Your exact coverage will depend on the policy and insurance provider, so it’s important to research the policy thoroughly and read the fine print, including the Product Disclosure Statement (PDS), before committing.
What are the pros and cons of pay as you drive car insurance?
Before you take out a pay as you drive policy, weigh up the potential pros and cons. Here are some factors you may want to consider:
Pros
- It can potentially save money on your premium.
- It can offer similar cover to a comprehensive policy.
- It typically offers flexibility to top up your kilometres as needed.
Cons
- It is only suitable if you drive less than average.
- You may be charged an additional excess if you exceed your kilometre limit.
- If you need to top up your kilometres, you usually will need to pay more.
- You can’t ‘set and forget’ like some other policies because you will need to make sure you are staying within your odometer range to avoid the additional excess.
Image: Banana Images/Shutterstock.com.
