A new rule about long-term vehicle insurance has been passed by the Insurance Regulatory and Development Authority of India (IRDAI), and it states that such package policies are not mandatory.
To come into effect from 1st August, the rule says that all long-term third-party plans that offer both third-party and own damage coverage have been withdrawn. This means that the price of new bikes and cars will reduce.
Introduced in September 2018, the long-term vehicle insurance plan saw car buyers buy a 3-year mandatory package and 2-wheeler buyers take a 5-year package.
IRDAI has come to the decision due to misuse of such policies by car and bike dealers which resulted in a rise in vehicle retail prices.
Now, with the new ruling, a customer will only have to buy a third-party motor insurance. But again, this is a long-term package with the number of years for cars and bikes fixed at three and five, respectively.
Further, the third party liability for customers who own a long-term insurance policy covering both third-party and own damage will remain mandatory and the cover will remain valid.
A customer can also switch his or her own damage component to a new insurer at the time of renewal if the services offered are not satisfactory, but its validity will be limited to one year.
This comes at a time when manufacturers have started offering attractive finance schemes to lure in buyers as they are hit by the pandemic. In the end, it is the customer who will benefit from reduction of on-road price of a vehicle.
Long-Term Vehicle Insurance
- IRDAI has stated that long-term vehicle insurance is not mandatory
- Cost of new vehicles set to go down from 1st August 2020
- But customers will have to buy a third-party insurance package
