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Is the Long Term Motor Insurance Cover Going Away? All You Need to Know
Mumbai, October 28, 2020
Registration, insurance, road tax, and accessories are significant costs apart from the actual price of the vehicle. Since these factors have a direct impact on the effective price or on-road price, any amendments in the law affect the cost of your vehicle.
Buying a new vehicle is going to be affordable now. You may ask why. The regulator, Insurance Regulatory and Development Authority of India (IRDAI) has done away with long term comprehensive motor insurance policies. This amendment comes into force from 1st August 2020 and is applicable for four and well as two-wheelers.
What is the amendment?
The update on the above options is the withdrawal of long term package policy, i.e. long term comprehensive policies stand cancelled. Thus, you can no longer avail either 3-year or 5-year car or two wheeler insurance. Apart from this deletion, you should know that long term policies are still mandatory from the other alternatives, and you will be required to pay an upfront premium at the time of purchase.
The impact of this amendment
The direct impact of scrapping one of the expensive insurance options is your vehicles being more affordable. It directly impacts the on-road price of which insurance costs were are a percentage of the purchase price. You can avail car or two wheeler insurance online to further omit the commissions of third-party sellers.
Apart from the impact on the cost of your vehicle, if you are dissatisfied with the own-damage cover, now you have the option to change your insurance company at the end of the first year.
Reason for discontinuing long term comprehensive motor policies
The regulatory body sought feedback on the way long term packaged insurance products were priced and how they functioned. It led to a conclusion that these plans were dearer for an average buyer and thus marketing them became increasingly difficult.
In some cases, it was discovered that these policies were linked to the finance schemes for the vehicle, and it was a burden on the customer. Moreover, any discontent with these long term policies could be resolved at its renewal after three or five years.
Lastly, there was ambiguity regarding the calculation of the no-claim bonus. This led to confusion and was one of the reasons for discontinuing the policy.
What remains now?
While long term comprehensive plans are no longer available for purchase, the next best alternative is one year of own-damage cover and three or five years, respectively for 4 and 2 wheelers, of third-party cover. Also for someone looking to cut down the cost further, can opt for only third-party coverage.
Make a careful selection of your insurance policy considering your requirements. The choice of insurer and the policy rests with you, be it a two-wheeler / car insurance online or offline. To enhance the coverage, you can also opt for additional features like zero depreciation, engine protector, NCB protector, and more.
(Disclaimer: This is branded content. Readers are advised to exercise due diligence and discretion before entering into any correspondence, investment, purchase, business dealings or any other decision on the basis of this content.)