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IRDAI Makes Long-Term 3rd Party Insurance Must Research Team | Posted On Wednesday, December 12,2018, 06:08 PM

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IRDAI Makes Long-Term 3rd Party Insurance Must



Planning to buy a car or a two-wheeler? You need a third-party motor insurance plan. Third party liability plan is compulsory in India. If you meet with an accident and cause death/injury or property damage to an unrelated party (third party), they are compensated for the loss.

The Insurance Regulatory and Development Authority (IRDA) have allowed insurers to sell three and five year third-party liability insurance plans for four wheelers and two wheelers. The premiums have been clearly spelt out.

Why long-term third party liability insurance? Motor vehicle owners often forget renewing third-party liability motor insurance plans. With long-term third party liability insurance, two-wheelers and cars are covered for a longer period of time.

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Long-Term Third Party Insurance

What are the benefits of third party insurance? With third-party insurance, your vehicle is always covered and even if you meet with an accident causing injury/loss of life/property damage, the victims are compensated.

Long-term third party insurance offers price stability and real convenience. You don’t have to renew third party liability plans each year. You stand insulated from third party liability motor insurance plan hike in premiums each year. It’s also good as it minimizes the presence of non-insured vehicles on Indian roads.

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What are comprehensive motor insurance plans?

Comprehensive motor insurance plans offer third-party liability cover and own damage cover. You are also compensated for damage to your vehicle or injury suffered in an accident as these come with personal accident plans. Comprehensive motor insurance plans charge higher premiums than third-party liability motor insurance plans.

IRDA on two-wheelers

The Supreme Court of India has passed a decision directing third-party liability insurance on two wheelers for at least 5 years. The IRDA has passed a mandatory notice increasing insurance cover for two-wheelers from a year to 5 years. IRDA has made 5 year third party motor insurance compulsory for two-wheelers.

What are two-wheeler manufacturers doing? The 5 year third party motor insurance is paid as a lump sum. This is a sizeable cost vis-à-vis the price of the motor bike. However, Long-term third party insurance is very important for two-wheelers in India.

IRDA on four-wheelers

IRDA has said that four-wheelers will require a minimum three years of third party liability costs. This would push up premiums on motor insurance plans. This will push up insurance costs for both two-wheelers and four wheelers. The cost on third-party insurance for two-wheelers would increase from Rs 425 a year to Rs 1,045 for 3 years for two-wheelers with engine capacity exceeding 75cc.  For passenger vehicles of 1000cc to 1500cc, third party liability premiums will be around Rs 9,500.

SEE ALSO: Personal loan in India

New motor insurance plan rules:

  • Instead of annual premium payments, third party liability premium must be paid as a lump sum.
  • Third party tariff goes up.
  • The third party liability motor insurance premium has to be paid as per rules. This is 3 years for cars and 5 years up front motor insurance premiums for two-wheelers.

The new rules do not impact existing motor insurance plans. They apply only to new cars and two wheelers purchased after September 1st 2018. The registration date is considered to be purchase date. The upfront premium must be paid only on third-party liability and not own damage. The IDV (Insured Declared Value) is not affected by new rules. NCB (No Claim Bonus) is calculated only on the own damage section and new rules don’t have an effect.

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