Insurance Regulatory and Development Authority of India has made it mandatory for car and bike buyers to purchase at least three years of third-party insurance for cars and at least five years of third-party insurance for bikes. Third-party insurance is the most basic kind (usually the cheapest) of motor insurance. It does not cover the damage done to the car but makes sure that any third person involved in an accident is covered by insurance.
This move will ensure that the buyer does not operate on the roads without a valid insurance. While the car/bike owner will end up paying more, this move means that the damage done to the third party is covered for at least three or five years, depending on the vehicle.
From Sept 1, while purchasing a car, the buyer will now have to be aware of the different permutations and combinations of the types of insurance.
Types of insurance
With the new IRDA regulations, a car buyer will have to purchase at least three years of vehicle insurance at the time of purchase. However, there are different kinds of insurance which need to be taken into consideration.
The buyer will essentially have three options while making the purchase.
The first option is that they just buy basic third party insurance for three years. This insurance does not cover the damage done to the vehicle but only the third party that is injured during an accident.
The second option is to pay for third party insurance for three years and comprehensive insurance for one year. This will result in a higher premium but will cover the damage done to the car including the third party.
The third option is to pay the entire insurance (third party + comprehensive) for all three years. With this option, the buyer won’t need to pay the premiums for the next three years. In the occasion of an accident, where the premium needs to be modified, the third party insurance will remain active at all times during the three-year tenure.
Conflicts in new policy
The changes in the motor insurance policy may seem to be for the greater good but a few players in the Indian insurance industry may have to bear the brunt of this change. Insurance agencies that have tie-ups with OEMs will have a greater chance of latching on to customers for a long period of time. This might adversely affect the smaller players in the industry and later lead to monopolisation of a few agencies.