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  1. All you need to know about long-term car insurance and how it will impact the premiums

All you need to know about long-term car insurance and how it will impact the premiums

The Supreme Court has made it mandatory for all the two and four-wheeler vehicles bought on and after September 1 to be covered by long-term insurance in order to reduce the number of non-insured vehicles on road.

By: | Published: October 10, 2018 5:15 PM
As your insurance policy would be long term, remember that neither you nor the insurance company can cancel the third-party cover during the term.

The Supreme Court has made it mandatory for all the two and four-wheeler vehicles bought on and after September 1 to be covered by long-term insurance in order to reduce the number of non-insured vehicles on road. This move has seen several general insurance companies roll out long-term insurance policies in the form of stand-alone third-party cover, bundled long-term third party and comprehensive cover.

How Will This Impact The Premiums On Your Car Insurance?

Since the insurance cover for three/ five years is to be purchased at the time of buying the vehicle, your premiums would rise proportionally and you would need to shell out more. However, this saves you from yearly renewals, which is subject to change, as the premiums may not remain the same for the entire tenure. Apart from doing away with the practice of yearly renewal, your car will cost you more as the tariff for third-party insurance has also increased. So, if you’re buying a car exceeding 1500 cc, you’ll be paying about Rs 17,000 more.

When it comes to the No Claims Bonus, there is no real impact, as the NCB is applied to the own damage part of the cover and not on the third-party component. If you are signing up for long-term OD or a comprehensive cover, you will be able to take advantage of the NCB discount only after a minimum of three years. However, at the moment companies are offering discounts on long-term premiums for own damage to allow more savings.

What To Keep In Mind?

As your insurance policy would be long term, remember that neither you nor the insurance company can cancel the third-party cover during the term. So, you won’t have the freedom of switching insurers every year. The exceptions to this rule are in case of double insurance, when a car is sold, transferred, or is not in use. So, choose your insurer wisely. Instead of blindly relying on your car dealer, research online to find the insurance that best suits you.

Instead of opting for a standalone third-party insurance, go for a comprehensive cover. Apart from third-party insurance, a comprehensive cover includes own damage cover and riders like engine protection and zero depreciation and add-ons protecting you from additional costs. So, you are protected against theft, burglary, accident, natural calamities etc. What you need to think about is whether taking a one-year comprehensive cover works better for you considering the NCB or not.

When you compare policies available in the market, don’t just go by the coverage and add-ons, also the look for user reviews and ratings. Additionally, on purchasing cars approved by the Automotive Research Association of India (ARAI) can get you a 2.5% discount on your premiums. This means that if your new car has in-built security features, you can insure your vehicle for a lesser amount.

(The writer is CEO, BankBazaar.com)

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