What are the Benefits of Long-Term Car Insurance Policy?

Though a valid third-party insurance policy is mandatory for all vehicles in India, compliance to this law was found to be very low in 2018. As per a Supreme Court Committee’s report of March 2018, only one out of three vehicles in India was found to have a third-party liability cover. The report also mentioned that about 40% of cars that are more than three years old remain uninsured in India.

In order to reduce the number of uninsured vehicles on road, the Honorable Supreme Court of India gave a landmark order in July 2018, making it mandatory for all cars and two-wheelers sold on or after 1^st September 2019 to have a long-term third-party motor insurance cover. The duration for this mandatory long-term coverage was 5 years for two-wheelers and 3 years for four-wheelers.

In August 2018, the Insurance Regulatory and Development Authority of India (IRDAI) directed the motor insurance companies to comply with the Supreme Court’s order and start offering long-term insurance plans for all vehicles sold after 31^st August 2019. Also, it asked the insurers to offer bundled plans that can provide long-term coverage for both – third-party liability as well as own damage.

As a result, vehicle buyers were offered three choices –

1. 3-year third-party cover
2. 3-year third-party and 1-year own damage cover
3. 3-year third-party with 3-year own damage cover

If you have any doubt about the benefits of a long-term car insurance policy, let’s put them to rest right away.

1. It eliminates the hassle of policy renewal 

   The first and foremost advantage of buying a long-term car insurance policy is that it eliminates the hassle of renewing the policy every year. Many times, the car owners miss the renewal date and forget to renew their car insurance policies even after it has expired. This results in him/her driving an uninsured vehicle which can prove very dangerous.

   Buying a long-term policy will ensure that you do not have to renew it every year. Also, it saves you from the hassles of the renewal process such as entering your car details again, getting your car inspected, and so on.

2. Get more discounts on premium

   When a customer buys a long-term car insurance policy, he/she is required to pay the premium for multiple years at that time only. As a result, the insurance companies provide more discount on the total premium amount. Therefore, buying a long-term car insurance policy helps the vehicle owner in reducing his/her overall premium outgo.

   Additionally, the long-term policy protects the policyholder from annual premium hikes for third-party liability coverage. Usually, the IRDAI increases the third-party motor insurance premiums by 10 to 20 percent ever year after reviewing the number of claims made during the last year. You can avoid this hike in premium amount by buying a long-term car insurance policy.

3. Avoid policy expiry

   Driving an uninsured vehicle is a punishable offence in India. As per the Motor Vehicles Act (Amendment) of 2020, it can result in a penalty of ₹2,000 or imprisonment of up to 3 months or both. By buying a long-term car insurance policy, you can avoid policy expiry for at least three years and drive worry-free.
   Moreover, once a car insurance policy lapses, you will have to go through the lengthy paperwork and car inspection process again to buy a new policy. Hence, a single purchase of a long-term policy can save you from multiple hassles and penalties.

4. You will not lose out on NCB

   Insurance companies offer No-claim Bonus (NCB) to the policyholders in the form of discounts on premiums at the time of policy renewal. The NCB is offered to the policyholders for every claim-free year. This means that if you make a claim on your car insurance policy in a year, you will lose out on the NCB for the next year.

   However, by buying a long-term car insurance policy, you can prevent losing out on the NCB even if you make a claim anytime during the period of three years. It’s because the premiums for such policies are calculated after factoring in the NCB for the years during which the policy will remain active.

5. It ensures optimum safety of your car

   Driving an uninsured vehicle can not only attract traffic fines but also exposes your car to certain risks and hazards. For example, if your car gets stolen or damaged during an accident or collision, you will not get any compensation in the absence of a valid comprehensive car insurance policy. In such cases, you will have to pay for the repair or replacement of your car out of your own pocket.

   However, by buying a long-term car insurance policy with multi-year own damage coverage, you can ensure optimum financial security of your car. It will ensure that you do not face any adverse consequences in case of a mishap during the next three years.

To conclude

Buying a long-term car insurance policy is replete with benefits. It not only prevents the hassles of renewing the policy every year but also results in several other benefits such as discounted premiums, higher NCB, and enhanced coverage. However, before buying a policy, you should conduct a thorough research and compare various plans from different insurers. This will help you in making an informed decision.