Planning to buy after August 1, 2020
You will have to buy a long term third party liability insurance, three-year for four-wheelers, and five-year for two-wheelers. TP premiums are same across all insurers, and the coverage is identical. So, you do not have much of a decision to make. To insure your vehicle for own damage, there are two options. First, you could buy a ‘bundled’ policy. This will be a combination of long-term third party liability policy, and one year own damage cover. Second, you could buy two separate policies. One is a stand-alone long-term TP policy, and the other stand-alone own damage policy. Your no-claim bonus will accrue annually. You can use your no-claim bonus (NCB) to get a discount at the time of renewal of the own-damage policy.
Bought a vehicle between September 1, 2018 and July 31, 2020
You would have bought a long-term TP policy at the time of purchasing the vehicle. You can renew this as and when it comes up for renewal. At renewal, you will migrate to an annual TP liability insurance. If you bought a package insurance that included own damage for three years or five years, then on expiry of this period, you will migrate to an annually renewable own damage policy. The NCB accrued over the three-year or five-year period, will be availed at the time of first renewal. Note that your NCB is not valid for 3/ 5 years. Once you make a claim, the NCB will become zero. If you bought an annual own damage insurance, either as a bundled policy or as a stand-alone policy, then this remains annually renewable. NCB continues to accrue annually, and the discount can be claimed at each renewal.
Bought a vehicle before September 1, 2018
This order does not impact you much. Both your TP liability policy and own damage have been annually renewable. You can continue to buy annually renewable policies, either on a stand-alone basis or as a package policy. Your NCB gets accrued annually, and discount can be claimed each year at renewal.
Research estimates that about 40 per cent of cars that are more than three years old are uninsured in India. The first batch of long-term motor policies will come up for renewal only in 2021. We will have to wait and see how many policyholders renew. Some may hold a grievance about NCB, others may be happy with lesser upfront outgo, a few may miss the renewal date. If the renewal rates of the long-term policies turn out to be lower, we will have another set of challenges to deal with. Being uninsured and underinsured is a chronic problem for the country. We need to step up our enforcement efforts and at the same time make it easy for people to comply. Another one of the Supreme Court’s orders of 2018, asks the state governments to seize and dispose of an uninsured vehicle involved in an accident unless the owner deposits security sufficient to dispose the TP claim. That is a step in the right direction. Other ways to ensure compliance could be to mandate an active TP policy for a vehicle’s servicing and random inspections at petrol pumps. Premium financing and auto-debit to bank accounts for renewals could be ways to ease adherence.
