Now IRDAI has decided to scrap the long-term comprehensive motor insurance packages for 3 years for four-wheelers, and for 5 years for two-wheelers. With these changes from the 1st of August, individuals will be paying less in case of purchasing a new vehicle.
According to the latest Insurance Regulatory and Development Authority of India (IRDAI) mandate, from 1 August 2020 long-term motor insurance packages covering both own damages and third-party (TP) damages, for 3 years on four-wheelers and 5 years for two-wheelers, will be discontinued.
Note that, the change from 1 August will only be on long-term policies offered on third party liability for 3/5 years. On Indian roads, holding a third-party liability motor insurance cover is mandatory for all vehicle owners, whereas, having an own damage policy is not compulsory.
Even though it is mandatory, a low percentage of people actually follow the rule of holding third-party liability insurance. To compel more people to buy motor cover, in August 2018, the Supreme Court of India had directed to make a long-term third-party motor policy mandatory for vehicles. IRDAI then directed general insurance companies to only sell broadly 3 types of motor insurance policies:
1. A long term package cover – For four-wheelers, a 3-year TP and 3-year own-damage (OD) cover. For two-wheelers, 5-year TP, and 5-year OD cover.
2. A bundled product – For four-wheelers, a 3-year TP and 1-year OD policy. For two-wheelers, a 5-year TP and 1-year OD policy.
3. For four-wheelers, 3-year TP only policy. For two-wheelers, 5-year TP only policy.
However, now IRDAI has decided to scrap the long-term comprehensive motor insurance packages for 3 years for four-wheelers, and for 5 years for two-wheelers. With these changes from the 1st of August, individuals will be paying less in case of purchasing a new vehicle.
Having said that, vehicle owners should be aware that long-term motor TP policies will still remain mandatory and he/she will have to make an upfront premium payment for 5 years in case of 2-wheelers and for 3 years in the case of 4-wheelers.
Additionally, insurers will only be able to sell the long-term policies in bundle form, wherein, the package would have: for four-wheelers, 3-year TP, and 1-year OD policy; for two-wheelers, 5-year TP and 1-year OD policy.