• IRDA Guidelines For Motor Insurance

    Car Insurance
    • Protect yourself with third party or comprehensive cover
    • Use bumper to bumper policies to reduce your liability
    • Enjoy facilities like zero depreciation and roadside assistance covers

    The Insurance Regulatory and Development Authority (IRDA) has drawn up guidelines that the general insurers offering motor insurance should adhere to at all times. It is also mandatory for all the vehicle owners to have a motor insurance policy and adhere to the guidelines set by the IRDAI. As per the Motor Vehicles Act, it is mandatory for vehicle owners to at least have a third-party liability cover, in case anyone is seen driving a vehicle without a valid motor insurance plan, he/she be penalised. An insurance certificate will be issued by the insurer to the insured after a policy purchase or policy renewal has been made.

    A motor insurance policy covers the following:

    • Liabilities towards the own vehicle damages
    • Liabilities towards the own injuries
    • Liabilities towards the third-party vehicle damages
    • Liabilities towards the third-party injuries

    Types of Motor Insurance Policies

    The insurance firms in India offer two types of motor insurance plans:

    • Third-party liability motor insurance
    • Under this policy, third-party liabilities incurred as a result if a mishap is covered by the insurer.

    • Comprehensive motor insurance policy
    • A comprehensive motor insurance policy covers third-party as well as own damage liabilities incurred at the time of a mishap.

      Comprehensive cover is an extensive cover and covers the liabilities incurred due to the following:

    Natural Disasters Man-made Disasters
    Fire Theft/Burglary
    Lightning Housebreaking
    Earthquakes/Floods/Cyclones/Storms/Tempests/Hurricanes/ Frost/Hailstorm/Inundation Self-Ignition
    Rockslides/Landslides Self-Ignition Strikes/Riots/Terrorism/Malicious Acts While the vehicle is in transit through any means of transport Accidental External Sources

    Exclusions under Motor Insurance Policy

    Any motor insurance policy comes with certain exclusions, the insurer will not cover your liabilities under the following circumstances:

    • If the driver of the vehicle doesn’t hold a valid licence
    • If the person driving the vehicle was under the influence of any intoxicants
    • If the mishap took[place outside of the geographical limit mentioned in the document
    • Electrical or mechanical failure of the vehicle
    • If the vehicle was being used for any illegal purpose

    The Insurance Amount for Motor Insurance

    • For Own Damage Cover
    • The sum insured for the own damage cover depends on the present market value of the vehicle minus the depreciation value based on the vehicle’s age. The sum insured is called Insured Declared Value or IDV of the vehicle.

    • For Third-party Liability Cover
    • For third-party liability insurance cover, the insured sum is determined as per the Motor Vehicles Act of 1988 which also includes a personal accident cover for the injuries to the car owner. You can also add few inclusions to your insurance policy such as cover for the driver, cover for the passengers, etc.

    Customer Turnaround Time

    The below table exhibits the customer turnaround time as approved by the IRDAI:

    Insurance Process No of Days
    Issuance of policies. Processing of policies. Cancellation of policies. 15 days
    Issuance of proposal copy. 30 days
    Services after the issuance of policy. Refund of proposal deposits. Non-claim requests. 10 days
    Submission of survey report. 30 days
    Addendum report for the insurer. 15 days
    Claims settlement after the addendum report has been received. Claims rejection after the addendum report has been received. 30 days
    Acknowledgement of grievances. 3 days
    Resolution of grievances. 15 days

    Motor Insurance Policy Premium

    There are a number of factors that affect the motor insurance premium. Insurance premiums differ from insurer to insurer. It is vital that you compare different insurance policies available in the market and choose the one that serves your insurance needs and is financially affordable. Opting for a higher deductible will lower your insurance premium.

    A few of the factors that determine your insurance premium are:

    • Model of the vehicle
    • Registration details of the vehicle
    • Engine number, chassis number, seating capacity and cubic capacity of the vehicle
    • Fitness certificate of the vehicle
    • Age of the vehicle,
    • Driving licence Validity
    • Driving record
    • Geographical location where the vehicle was registered

    The insurance premium for own damage coverage is decided after getting approval from the IRDAI. The premium for own damage cover will be determined based on a number of factors such as age of the vehicle, discounts on the insurance premium offered by the insurer, valid document submission, claims and driving history, IDV of the vehicle, etc.

    The insurance premium for a third-party liability coverage is determined by the IRDAI. In case it is found that there is a break in insurance, your vehicle will be re-inspected by an authorised surveyor sent by the insurer and you will be liable to pay additional charges to procure the insurance.

    In case you decide to install a CNG/LPG kit in your car, you need to inform your insurer and the Road Transport Authority (RTA) office in order to make the change in the registration certificate as well as the insurance policy document. As installing a CNG/LPG kit is a premium bearing endorsement, you will be charged extra for the same.

    In order to lower your car insurance premium, you can avail any of the insurer approved discounts depending on the coverage you are opting for, a few of them are listed below:

    • No Claim Bonus Discount
    • Professional Discount
    • Discount if you are a member of any of the automobiles association of India
    • Discount if you opt for a higher deductible
    • If you own a vintage car that is certified by the Vintage and Classic Car Club of India
    • If you install ARAI (Automobile Research Association of India) approved anti-theft devices in your car
    • Discount in on vehicles designed for the physically or mentally challenged individuals

    No Claim Bonus (NCB) in Motor Insurance

    NCB is a discount on the insurance premium awarded to the insured by the insurer for every claim free year. You can accumulate the NCB for a maximum of 5 years starting from 20% to a maximum of up to 50%.

    Motor Insurance Policy Tenure in India

    Any motor insurance in India is generally valid for a period of one year. In case you do not renew the insurance policy, a re-inspection of the vehicle will be conducted and you will have to pay for additional premium for the same. In case you have NCB and you fail to renew your insurance policy within 90 days of your policy expiry, you will lose your No Claim Bonuses.

    Deductibles in Motor Insurance

    Deductibles/excesses in motor insurance are of 2 types, voluntary deductible and compulsory excess. Voluntary deductible is where the policyholder volunteers to pay a part of the insured sum at the time of the claim settlement. Compulsory excess is a part of the insured sum that is mandatory for the policyholder to pay as per the agreement with the insurer.

    New changes brought in by the IRDA 

    There were some changes to the existing rules and regulations implemented by IRDA. Some of the changes are: 

    • Premium outflow will be impacted: According to the new changes in the rules, the new third-party premiums will be paid as a lump-sum amount which means that the net outflow will increase for the first year. The tariff has been set by IRDA and hence no premium is required to be paid for the 2nd year and the 3rd year. Once you have paid the premiums upfront, you will enjoy the benefits of your policy till it is active. 
    • Increase in tariff: The tariff for new cars, except for those with engine capacity below 1000cc, has increased. Given below are the new tariffs that you will have to pay depending on the capacity of the vehicle owned by you: 
      • Engine capacity not more than 1000 cc: There is a decrease of Rs.264 in the new tariffs if the capacity of your vehicle does not exceed 1000 cc. The new total premium rates for a three-year policy will be Rs.5,286 as compared to Rs.5,550 which was the rate earlier. 
      • More than 1000 cc but less than 1500 cc: The new third-party tariff will almost be 3.33 times the previous tariff you had to pay. While the earlier old collective premium was Rs.8,589, you will now be required to pay Rs.9,534. 
      • More than 1500 cc: There will be a significant increase in the tariff. While previously you had to pay Rs.23,670 for a period of three years, you will now pay Rs.24,305. 

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