Motor insurance: Here is how you can get Rs 15 lakh personal accident cover on buying car insurance

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New Delhi | Published: September 25, 2018 12:10:37 AM

Buyers of new cars and two-wheelers will also now have to mandatorily purchase third-party insurance cover upfront for at least three and five years.

Motor insurance: Get Rs 15 lakh personal accident cover on buying car insurance

The insurance regulator has directed all general insurance companies to raise the compulsory personal accident cover for owner-driver to Rs 15 lakh. The premium for all classes of vehicles for this cover has been fixed at Rs 750 per annum for annual policy and this rate will be valid until further notice, Insurance Regulatory and Development Authority of India (Irdai) said in a circular. An insured person wanting a cover more than Rs 15 lakh can buy one by paying a higher premium.

At present, the capital sum insured (CSI) for motorised two-wheelers and private cars/commercial vehicles is Rs 1 lakh and Rs 2 lakh, respectively. However, a few non-life insurance companies have been offering add-on covers by charging additional premium. The owner of the insured vehicle holding a valid driving licence is termed as owner-driver for the purposes of this section. The cover is provided to the
owner-driver whilst driving the vehicle including mounting into or dismounting from or traveling in the insured vehicle as a co-driver.

The insurance regulator’s directive comes after a Madras High Court judgment in October last year which ordered Irdai to enhance the compulsory personal accident cover from the existing `1 lakh to at least not less than Rs 15 lakh to “add to some succor or solace to the victims of road accidents, who are the owner of the vehicle, who may incidentally sustain bodily injury or death”.

The court also ordered that an option can be given to the insured/owner of the vehicle to pay higher premium amount to get enhanced compensation over and above `15 lakh in case the owner of vehicle desires such enhanced compensation.

Long-term covers

In order to reduce the number of uninsured vehicles on the road, the regulator has also mandated that buyers of new cars and two-wheelers will now have to mandatorily purchase third-party insurance cover upfront for at least three and five years, respectively. Long-term third-party insurance will reduce the hassles of renewing the policy every year and an increase in the number of insured vehicles could bring down the premium as the risk pool becomes larger. It will also ensure that the policyholder has some stability in rates for a defined period. For insurers, long-term third party will lead to higher penetration and premium volumes.

Third-party motor insurance is mandatory under the Motor Vehicles Act. In case of road accidents and fatalities there is no legal time limit on insurance claims. While the premium for third party liability cover is limited and is fixed by the regulator every year, claims are unlimited. As a result, the non-life industry bleeds on this portfolio.

Add-on covers

Third-party insurance only covers the damage done by one’s insured vehicle to other vehicle or property and people and does not cover accidents, theft or damage to one’s own vehicle. Policyholders should look at a comprehensive cover which takes care of the own damage portion, especially loss or damage due to fire, explosion, accidents or while in transit by road or rail, and even burglary and theft. A comprehensive motor insurance cover comprises own-damage and third-party insurance.

Riders, which are optional add-on covers, protect from those things which are excluded and can save car owners from unnecessary vehicle-related expenses. One can take add-on covers to the basic vehicle insurance and the pricing is based on the Insured Declared Value (IDV) of the vehicle. Insurers fix the IDV of the vehicle every year at the time of renewal of the policy based on the year of manufacturing, selling price of the brand and the model and depreciation of the vehicle.

In zero or nil depreciation cover, the policyholder will get the full claim on the value of parts such as plastic items, fibre, rubber, windscreen that are replaced in the event of loss due to accident. Engine cover rider provides protection to the engine in case of flooding as hydro-static lock is a major cause of engine failure.

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