Personal Finance

Motor insurance costs rise

Rajalakshmi Nirmal | Updated on September 02, 2018 Published on September 02, 2018

Following a Supreme Court order, the Insurance Regulatory and Development Authority (IRDAI) has made it mandatory for all general insurance companies to issue a three-year third-party insurance cover for cars, and five-year third-party cover for two-wheelers. This will, however, be applicable only for new vehicles bought after September 1.

Motor insurance policies have two parts — a third-party cover that is mandatory and an own-damage cover .

You can still buy own-damage cover for a one-year term and keep renewing it every year.

The move will bump up insurance costs for car/two-wheeler buyers.

Sample this: the one-year premium on insurance for a new Maruti Suzuki Baleno is about ₹21,000 (cost of both third-party and own-damage covers). Now, because it will be a three-year policy, you will have to cough up much more.

So, if you are going to, say, take a personal loan to make the premium payment, you will have to price in the cost of finance, too.

Also, remember that the full three/five-year premium will have to be paid in one go; there will be no option to make the payment monthly/quarterly, say insurance companies.

If you want to cancel the policy after the first year, say, because you sold your vehicle, the insurance company will return your balance premium, says Tarun Mathur, Chief Business Officer, General Insurance, PolicyBazaar.

No-claims bonus (NCB) benefit will work the same way as before, with the difference being that it will accrue over the three/five-year term.

For a policyholder, the move eases the trouble of renewing the policy every year. But insurers may charge a higher premium to lower their risk.

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