first august 2020, the Insurance Regulatory and Development Authority of India (IRDAI) had made some major changes within the vehicle-related policy norms. The body had decided to get rid of the mandatory long-term motor insurance packages that cover both own damages (OD) and third-party (TP) damages. This rule is effective from today onward. The step will effectively minimize the on-road prices. Hence, buying a replacement car or bike has became cheaper now.
car and bike insurance
What’s the New Rule?
With the implementation of this latest rule, the new vehicle owner would require to shop for a minimum of one-year compulsory third-party (TP) insurance. Additionally, buyers also can choose own damages (OD) cover. it’s important to notice that this new insurance rule are going to be applicable just for those vehicles which will be purchased on or after Lammas , 2020.
What was the rule earlier?
Earlier, by the order of the Supreme Court, it had been mandatory to require an extended insurance policy for both four and two-wheelers. This includes third party insurance (3 years for cars and 5 years for scooter/bikes) and an on-damage cover of 1 to five years. In such circumstances, customers had to pay a really high price for the new vehicle. This rule came in effect from September 2018 and eventually now has ended.
What is Own-Damage Cover?
On-Damage (OD) covers your vehicle against the damage caused thanks to theft, accidents, and natural disaster. It compensates you for the expense to repair or replace parts of your car damaged within the accident. In some cases, it also covers the driver’s death. However, it’s subject to conditions.
what is own damage cover
What is third party insurance?
Unlike the own-damage policy, it covers the loss caused to the third party. for instance , suppose you had an accident with another vehicle. during this case, the damage to your vehicle are going to be covered by an own-damage policy, while the damage to the opposite party caused by you, are going to be covered in third party insurance.
Why IRDAI did withdraw the future insurance rule?
No one is untouched with the very fact that the on-going COVID-19 pandemic has badly affected each and each sector economically. Many employees have lost their jobs, while some are working with significantly decreased wages. All this has naturally became a drop by the purchasing power of the masses involved.
Even before, it had been very difficult for buyers to pay such an enormous cost of the policy . Customers had also complained about the OD prices that were very high. Also, it had been not regulated by IRDAI. The distribution of package policies has its own challenges thanks to affordability factors for an outsized section of auto owners.
Apart from the explanations mentioned above, the body also examinated these following issues/concerns before taking this decision:-
reasons why IRDAI withdraw the future policy rule
Claim bonus are going to be provided
As per the new rules, customers, whose long-term policy remains valid, are going to be given a ‘no claim bonus’ at the top of the policy.
Removing this future policy regulation was a right and necessary step, especially at a time when the economic state of individuals has deteriorated quite ever. The future policy had its own merits and drawbacks . Its negative effects were mainly seen on entry-level cars/bikes, where buyers’ restricted budget is that the main factor. this example was even more worse within the context of premium cars where the on-road price would sometimes go up to lakhs thanks to the future policy.