What is pay as you drive insurance?
If your car spends more time parked in the driveway than on the road, pay as you drive insurance could be worth considering. Pay as you drive car insurance typically provides the same features and coverage as traditional comprehensive car insurance, but your premiums partly depend on how many kilometres you plan to drive.
Who is a pay as you drive policy for?
Pay as you drive policies are largely designed for people who don't drive that much, as what you pay is determined by how much you use your car. This type of policy might suit you if:
- You mostly use public transport for commuting or travel
- You work from home
- You’re retired
- Your household has multiple cars, and one car isn’t used much.
While some insurers offer dedicated pay as you drive policies, there are other ways to save if you're a low-kilometre driver, especially if how far you drive doesn’t vary much each year. Some insurers offer other forms of discount or lower premiums on standard comprehensive policies for motorists who spend less time on the road.
How does pay as you drive car insurance work?
A pay as you drive car insurance policy doesn’t work like a taxi meter. Instead, you work out how many kilometres you expect you’ll drive in a year and select a threshold above that. As long as you don’t drive further than that limit, you could expect to pay a lower premium.
Generally, the fewer kilometres you nominate, the lower your premium is likely to be. When you apply for a pay as you drive policy, you’ll usually provide your car’s odometer reading, which acts as a baseline. If you drive more than you told your insurer you would and you need to make a claim, you might face an additional excess. You can usually 'top up' if you think you're going to go over.
Pay as you drive vs traditional comprehensive car insurance
Pay as you drive insurance offers many of the same features and benefits as a standard comprehensive policy, but there are some key differences worth understanding if you’re thinking about taking out a policy:
Comprehensive car insurance
With a traditional comprehensive policy, your premium is typically calculated using factors such as your age, driving history, where you live, and the type of vehicle you drive. While some insurers might ask how many kilometres you tend to drive each year, there usually isn't a formal kilometre allowance attached to the policy.
Pay as you drive car insurance
Pay as you drive insurance tends to be cheaper, as it is specifically designed for motorists who spend less time on the road. Typically, you'll nominate an annual kilometre allowance, with your premium partly based on how far you expect to drive. If you exceed your agreed kilometre limit, your insurer may charge an additional excess (if you need to make a claim) or adjust your policy (and likely your premium) in line with its terms and conditions when you renew.
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:
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
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 10/04/2026. Other providers may also offer Pay As You Drive or Pay Per Kilometre insurance policies.
Is pay as you drive insurance worth it?
Whether pay as you drive insurance is worth considering will depend on how often you use your car and how many kilometres you typically travel each year. If your car doesn't spend much time on the road, your insurance premium may be priced in a way that doesn't reflect how often you're actually driving. If this is the case, a pay as you drive policy could help reduce your premium.
Before taking out cover, it’s worth comparing quotes from multiple insurers to see which option provides the best value for your circumstances. After all, a pay as you drive policy with Insurer A might be more expensive than a standard comprehensive policy with Insurer B.
How to choose a pay as you drive policy
If you're thinking about applying for or switching to a pay as you drive policy, it's important to look beyond cost alone and compare how each insurer's cover works. Here are some factors worth considering:
Your annual kilometre allowance
Check how many kilometres are included in the policy and whether the allowance matches how far you typically drive your car. Underestimating your annual distance could result in additional costs later on.
What happens if you exceed your limit
Some insurers allow you to purchase additional kilometres during the policy period, while others may apply an additional excess if you make a claim after exceeding your nominated allowance.
The level of cover provided
Pay as you drive insurance can include many of the same features as standard comprehensive car insurance but, as with any policy, inclusions vary between providers. Compare benefits, limits, and optional extras before making a decision.
Policy costs and excesses
A lower premium may not always mean better value. Compare excess amounts, claim conditions, and any fees that could apply if your circumstances change.
Customer service and claims support
The claims process can be just as important as the price you pay. Reading product information and comparing insurers may help you understand what level of support is available if you need to make a claim.
