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Long-Term Car Insurance Policy: How to Go About Them

As the risk of accidents are high in case of two-wheelers, it makes sense to go for a long-term comprehensive cover.

  • 29 Nov 2018
  • min read

As per the new directive laid out by the Supreme Court and enforced by Insurance Regulatory and Development Authority of India (IRDAI), it is now compulsory for vehicle owners to buy a long-term third party Car Insurance policy. Earlier, you would get a one-year cover from your motor insurance policy but now, as per the order, the mandatory third party insurance cover for cars is three years and for two-wheelers it is five years.

So, if you have purchased a car or two-wheeler post September 1, it is compulsory for you to buy three-year and five-year third party liability covers respectively. Companies have already started selling these products. But, before you purchase any policy make sure that you compare the premiums and discounts.

A comprehensive motor insurance package consists of a third party liability cover, and an own damage component along with different, optional add-ons like zero depreciation and engine protection. Though initial costs of new vehicles would increase, a long-term policy brings several advantages.

Increase in Initial Premium Payment

For private cars, the long-term premium for three years will be approximately 3 times the one-year premium amount, whereas for two-wheelers the premium for the period of five years will be approximately 2.4 to 5.5 times that of the one-year premium amount.

This translates to a one time insurance premium outgo of ₹24,000 compared to ₹7800 for a private car exceeding 1500cc. In the case of bikes with an engine capacity of more than 350cc, the premium would go up to ₹13,000 compared to ₹2300 that is the norm.

Long-term motor insurance policies will be advantageous because as vehicles age and depreciation increases, many people tend to skip renewals or simply forget about renewing the policy. This initiative by the Supreme Court and IRDAI will help improve the penetration of insurance and bring more vehicles under the ambit of insurance.

Don’t Forget Discounts on NCB

Since the tenure of the motor insurance policy has increased to three years for cars and five years for two-wheelers, the annual benefit that NCB offered can no longer be passed onto the customer. The NCB benefit will only be available on expiration of policy tenure. Since the NCB discount is only applicable after the policy expires, insurers are offering upfront discounts on premiums to counter this loss to the customer.

“Customers can get dual NCB benefits in long-term. First, upfront NCB discount in price and secondly, higher NCB discount benefit as against existing NCB grid during renewal after three years. We are awaiting for the regulator’s approval.” says Sanjay Datta, Chief, Underwriting, Claims and Reinsurance of ICICI Lombard General Insurance.

Go For the Appropriate Combination

As the risk of accidents are high in case of two-wheelers, it makes sense to go for a long-term comprehensive cover. The advantage here is that the renewal rates are also extremely low. On the other hand, car-owners should dive deeper to pick the right combination of motor insurance cover. The overall cost of a long-term package will be cheaper in this case, but you have to consider the large one-time outgo on purchase.

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The director of a leading insurer was quoted as saying, “It is best to go for a long-term package policy of three years. You would be able to lock-in the premium rates for a period of three years and it will also free you from the hassle of yearly policy renewal.”

As per the initial trends, people are opting for a bundled third-party and one-year own damage cover as part of their motor insurance policy. Customers are opting for 5 year own damage and a 5 year third party cover in the case of two-wheelers and 1 year own damage and a 3 year third party cover in private cars. Going for a long-term own damage cover will take away your freedom to switch insurers every year.

Compare All Available Options

You need to ensure that you compare all the options of various portals when buying a policy. Some insurers may offer additional services, while others may offer some other perks. You can check these benefits, and also make sure to check customer reviews on social networks.

Opting for a motor insurance early on is a wise decision as it covers your prized possession from personal accidents, natural calamities, man-made calamities, and also from third-party legal liability.

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