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Insurance Article

How Multi-Year Insurance Plans Are Making Your Vehicle More Expensive

October 19 2018
multi-year-insurance-plans

The Supreme Court order means that general insurance firms will need to offer mandatory multi-year third party insurance

If you are planning to buy a new car or a two-wheeler, brace yourself to shell out more from your pocket as the honourable Supreme Court of India made it mandatory for all general insurance companies to offer long-term third-party insurance on vehicles sold on or after 1st September, 2018.

This means that instead of the normal one-year plan, insurers will now have to offer multi-year motor insurance policy for all the new vehicles depending on type.

IRDAI Directive After the Judgement

In line with the Supreme Court’s order, the Insurance Regulatory and Development Authority of India (IRDAI) directed the insurance companies to start offering three-year motor insurance plan for cars and five-year insurance policy for two wheelers. The directive is limited to third-party liability cover and the customer can exercise his choice as far as own damage cover is concerned.

The move is seen as a positive development by the industry experts, considering that only 30 percent of the registered vehicles in India are insured. The CEO of a general insurance company deemed the judgement as a positive move, given that many vehicle owners forget to renew their vehicle insurance policy after the initial years.

How the Move Will Affect Consumers?

As with any major regulatory change, this move too, comes with its share of merits and demerits. It will offer price stability and convenience to the consumers as they will not be required to contact the general insurance company for renewing their policy every year. It will also insulate them from yearly hikes in third-party insurance premiums.

On the other hand, this move by the apex court is bound to increase the on-road prices for purchasing new vehicles. Instead of renewing the policy every year, the customers will have to shell out the entire premium outgo for three or five-year third-party insurance at the time of buying the vehicle.

How Much More You Have to Pay for Your Vehicle?

The IRDAI also spelt out one-time premium amount for multi-year third party insurance policies on new vehicles. It means that prospective vehicle buyers will pay up to ₹24,000 more for purchasing new four-wheelers while they will have to shell out up to ₹13,000 more for buying two-wheelers.

Prices for three and five-year third party insurance for cars and bikes respectively have been categorised on the basis of their engine capacity. The tables below will provide you exact pricing details:

1. Private Cars

Vehicle category

Premium rate for 3-year TP insurance policy

Up to 1000 cc

₹5,286

1000-1500 cc

₹9,534

Above 1500 cc

₹24,305

2. Two Wheelers

Vehicle category

Premium rate for 5-year TP insurance policy

Up to 75 cc

₹1,045

75-150 cc

₹3,285

150-350 cc

₹5,453

Above 350 cc

₹13,034

Related Article:

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