IRDAI has decided to scrap the three year long term motor insurance comprehensive package for four-wheelers and a 5-year package sold for two-wheelers. With these changes being implemented a person buying a car after 1st August will be paying less. According to the latest rules by the Insurance Regulatory and Development Authority of India, these changes will only be on long term motor insurance policies offered on the liability of own damage for 3 and 5 years.
According to the Indian rules, every motor vehicle owner must have a third-party liability insurance cover whereas having an own damage cover is not necessary. Even though third-party liability is mandatory very less amount of people follow the rule and there is a huge challan each year on vehicles for not carrying insurance. To compel this decision in August 2018 Supreme Court of India had directed to make the long-term third-party insurance compulsory with every purchase of the motor vehicle. This included a 5 year long-term package for two wheeler insurance
, a 3-year plan for car insurance
and a bundled cover with own damage for both.
Now IRDAI has decided to scrap this plan and with these changes, the vehicles will be available at a much lower price than they were previously.
Buying a vehicle after 1st August?
If you are planning to buy a vehicle after 1st August you will have to get the insurance cover on your own and it will not be a mandatory purchase with the vehicle. Third-party coverage is same across all the insurers and the premiums too are identical as well as the coverage. What could differ are some bonuses which are in the hand of the insurer? Also, as getting third-party insurance is compulsory so you do not have much space to make a decision.
Insurance options available
For covering your vehicle, you have two options, either you can get a bundled cover which includes third party cover as well as coverage for your vehicle while apart from this you can also buy a one-year comprehensive plan which will cover your damages.
Apart from this, you can get two policies separately one for third party liability and one for their damage. The no-claim bonus could be used at the time of renewing the policy to get some discount on the premium.
IRDAI’s ruling has come at a time when the automobile industry is looking forward to encouraging new sales among the customers. The industry saw a loss in the selling four-wheelers and two wheelers from September 2018 around the same time when Supreme Court has made the insurance plan mandatory. The Indian auto sector faced a huge loss and performed worst in the year 2019 due to low sales rates, less interest of people in investing in new vehicles and general election as well. It was believed that the market will recover to normal in 2020 but the policy has been scrapped by IRDAI so that low prices could attract more buyers toward the sector.