Buying A New Car? Here’s Why You Need To Get Long Term Car Insurance
When buying a car, you should be aware of two facts – the Motor Vehicles Act of 1988 requires you to have third-party car insurance on your vehicle. Second, beginning September 1, 2018, the third-party insurance policy can have a three-year tenure rather than the previous one-year tenure.
In September 2018, the Supreme Court issued a clear mandate to insurance companies to offer only three-year car insurance online or offline policies. At the same time, the IRDAI instructed insurers to collect premiums for the entire insurance tenure rather than just one year. #
According to the IRDAI, the premium for the year shall be treated as income, while the remaining premium shall be treated as a “premium deposit” or “advance premium”. #
However, this created a problem for new car insurance policies that provide both third-party and own damage coverage. In response to this issue, the IRDAI stated that insurers could offer a long-term policy for both insurances or a bundled cover with a three or five-year term for third-party insurance and one year for own damage. # *
Insurers must also ensure that the changes are reflected when selling car insurance online. Shifts in tenure and cost must be advertised.
Customers and insurers alike have reacted positively to this directive. Why? Despite the Motor Vehicles Act mandate, several cars in India are not insured. Car owners either need to remember to renew their policies or have delayed because they’re looking for better deals elsewhere.
This constant thought comes back to them if their car damages third-party property or injures or hits a third-party individual. The resulting legal issues shall be enough to cause the car owner problems. However, if the vehicle were insured, the policy would cover any legal liabilities resulting from the accident. However, with a long tenure, they are more likely to insure their vehicles.
While the directive has many supporters, the pricing remains a source of consternation. To calculate the premium, most people use a car insurance premium calculator. However, because of the three-year rule for cars, the IRDAI, which sets pricing for third-party car insurance policies every year, will now have to consider pricing for three years. And it can be a complex task. #
Before deciding on a premium, the IRDAI must consider factors such as wage and inflation, among others. The Pollution Under Control (PUC) Certificate is another source of concern. Before renewing their car insurance online, car owners must present the certificate. And while this certificate is only valid for a short time, long-term insurance is right for three or five years. One must wait and see how this situation develops. #
However, most insurers and customers remain upbeat. With long-term insurance in place, insurers can now enter previously untapped markets. Car owners may no longer have to renew their new car insurance every year and must be more likely to purchase insurance.
The Supreme Court of India’s directive is encouraging this safety. Both the insurer and the buyer can benefit from it. But it remains to be seen how it is implemented and whether it may increase the number of people who buy third-party car insurance online when purchasing a new car.
* Standard T&C Apply
** Currently, there are 2 tax regimes in India – new and old. To get the tax benefit you desire, choose the correct one after consulting an expert. You can opt for a regime change during the next financial year.
# Visit the official website of IRDAI for further details.
## All savings are provided by the insurer as per the IRDAI-approved insurance plan. Standard T&C apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.