A long term comprehensive policy is applicable only for new cars & new bikes. It covers cars for 3 years & bikes for 5 years for both vehicle damage and third party.
The Insurance Regulatory and Development Authority of India (IRDAI) has given the insurers the liberty to come up with three types of motor insurance plans i.e. a standalone long-term third-party insurance policy, a long-term comprehensive insurance policy and bundled cover with a one-year term for own damage.
Devendra Rane, Founder & CTO, Coverfox.com told Moneycontrol that with the mandatory third-insurance policy and option of bundled cover with a one-year term for own damage, car owners need to shell out more from their pocket upfront. “Though insurers can discount the own damage part as they will get premium upfront, most new car insurance is sold at the car showroom and customers end up paying a higher premium than available premium in the market,” he said.
Vinay Taluja, EVP and Head Cross Sell, Landmark Insurance Brokers said that new private vehicles owners need to have 3 or 5 year Long term Third party (TP) cover while buying a new 4 wheeler or 2 wheeler respectively from Sep 1, 2018. "Currently companies have come out with a combination of 1-year own damage plus 3 year Third Party cover for new private vehicles. So next year when customer's own damage (OD) part is up for renewal, his TP portion would still be in force for the remaining 2 years. Hence, we expect that insurers would come out with Standalone Own Damage cover in the next few months so that policyholders can just renew their Own Damage Insurance cover on their Private 4 or 2 wheelers," he said.
Thus, the renewal of the first two types - standalone long-term third-party insurance policy or a long-term comprehensive insurance policy - would not see any change from the current process. However, for the bundled cover option, the insurer might deduct the third-party premium from the own damage premium on renewals.
Here are the features of three types of policies that one needs to understand going forward when, either they want to make a purchase for a new vehicle or have to renew their policy.
=> A standalone long-term third-party insurance policy
Usually, vehicle Insurance in India is issued for one-year term. 4 years back, IRDAI allowed 3-year long term policy for bikes and recently, IRDAI has opened 3-year policy for new cars and 5-year policy for new bikes. A standalone long-term third party (TP) policy is available for 3 years for Cars & 5 years for bikes of any age. This policy will cover the Third party losses like death, disability and property damage. It also covers vehicle owner's death & disability.
"The third-party liability only insurance policies for bikes and cars with a larger engine capacity will see an increase in premiums. On the other hand, the vehicle owners with smaller engines will witness a downfall in the premiums payable. Since the third-party premiums are a part of comprehensive plans, the premiums for these plans will also jump upwards,” Rane said.
=> A bundled cover with a one-year term for own damage
A bundled Insurance covers cars’ Third-Party (TP) for 3 years but own damage up to 1 year only. Likewise, for bikes, it covers TP for 5 years and own damage for 1 year only. "It is expected that IRDAI will come up with a structure for the renewal of own damage section of the policy. One possibility is the introduction of Own damage only policy, which can be bundled with TP only part of the next year," said Animesh Das, Head of Product Strategy, ACKO General Insurance.
=> A long-term comprehensive insurance policyA long term comprehensive policy is applicable only for new cars & new bikes. It covers cars for 3 years & bikes for 5 years for both vehicle damage and third party. Over and above the third party insurance covers, this policy covers the damage to the vehicle due to accident, calamities, fire & theft.