From August 1, long-term insurance cover of 3 years for cars and 5 years for two-wheelers will end. A new policy is coming in its place.
- Prohibition on motor insurance for long term
- This decision will help those buying new vehicles
- No need to pay huge premiums at one go
New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) in June directed insurance companies to stop selling long term motor insurance package policies to new vehicle owners from August 1, 2020. The decision of IRDAI was announced to reduce the on-road price of new vehicles. This means that the vehicle buyers will not be able to buy a long-term insurance policy on the new vehicle. In which there is a three-year cover for the car and five years for the bike and third party insurance is done.
From August 1, motor insurance for the long term which covers the damage to the vehicle. Damage or damage is covered by the third party. For a car that is for three years and for a bike for five years it will be scrapped. This decision will help the buyers of new vehicles as they will not have to pay huge premiums at one go.
According to Animesh Das, Head of Product Strategy, General Insurance, the Long Term on Damage (OD) component of the policy has been discontinued. Features and coverage of both On Damage and Third-Party Part are the same. On Damage Part is now limited to 1 year only. He further said that this decision will benefit the customers that after the expiry of one year it will help to switch to another insurer as per their wish. Secondly, there will also be relief in payment while buying a new vehicle.
According to the insurance regulator, long-term third-party policy is challenging for vehicle owners as it is difficult for vehicle owners to afford. It has been said that the loan was more likely to be forcibly sold or linked and policy holders remain unhappy with the product for a long time without any flexibility. This is the reason IRDAI decided to end it.
Insurance for vehicle purchase from August 1
If you are planning to buy a vehicle from August, you will not be required to take long term third party liability insurance, three years for four wheelers and five years of third party insurance for two wheelers. You will have two options for vehicle insurance. First of all, you can buy a ‘bundle’ policy which is a combination of long term third party liability policy and a one year on-demand cover. Second, you can buy two different policies. One is a stand-alone long-term TP policy, and the other is a stand-alone on-demand policy. Your no-claim bonus will increase annually. You can use your No Claim Bonus (NCB) to get a discount at the time of renewal of on-demand policy.
Insurance options available for new car buyers
New vehicle owners will be required to purchase long-term third-party motor insurance for three years for cars and five years for two-wheelers. They also have the option of purchasing a standalone annual OD policy separately from any insurer. Das said that customers will still have the option to purchase 2 variants of the long-term motor policy, 3-year third-party + one-year OD or 3-year OD policy and 5 years for the bike.