Motor plans to get costlier as IRDAI hikes sum insured for personal accident cover

By siliconindia   |   Thursday, December 6, 2018
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Motor plans to get costlier as IRDAI hikes sum insured for personal accident cover

Vehicle maintenance cost includes the spending in terms of fuel, spare parts, and scheduled service. The replacement of worn-out or broken parts will be done during the scheduled service or on an ad-hoc basis. The change oil, oil filter, brake fluid, power steering fluid and manual transmission fluid, air filter, fuel filter, spark plugs, fuel system additives and belts & hoses will be replaced or topped up as per the case. The maintenance cost also includes the expenses in terms of two wheeler insurance. The vehicle should be insured as per the Motor Vehicles Act, 1988.

Hike in insurance premium

The insurance premium will increase or decrease on annual basis as per the regulator, IRDA (Insurance Regulatory Authority of India). The regulator will assess the insurance claims in the past year and the premium will be adjusted to accomplish a healthy growth of insurance companies. Insurance companies should be able to settle claims and it can be accomplished when the premium collections plus other income sources are in tune with the claims made by customers.

Long-term insurance policy

  • With the introduction of long-term insurance policy, bike owners should buy a multi-year insurance for at least 3 years.
  • Bike owners should buy a multi-year insurance policy for at least 5 years
  • The owner-driver of the bike insurance policy should be covered by personal accident. It is mandatory as per the law. Hence, the insurance premium will increase as per the new regulations introduced from September 1, 2018.

Payment of third-party insurance

  • The third-party premium for long-term two wheeler insurance policy should be collected for the entire tenure.
  • The third-party premium should be paid as lump sum while the own damage can be paid on an annual basis or lump sum.

Upfront payment clause

  • The upfront payment clause is applicable for vehicles which are purchased after September 1, 2018.
  • Older vehicles will continue to pay the personal accident cover and own damage on an annual basis.

Third-party premium

  • The third-party premium is based on the cubic capacity of the engine
  • If the engine size is big, you will want to pay a higher insurance premium

Personal accident cover

  • The personal accident cover should be bought for a minimum of 3 years for new vehicles bought after September 1, 2018
  • As per the latest increase in tariff, the insurance company has increased the personal accident cover as well.
  • Now, two wheeler insurance companies will extend the personal accident coverage up to Rs. 15 lakhs
  • Before the revision of the premium, the maximum sum assured was Rs. 2 lakh for private or commercial vehicles.
  • The premium for personal accident cover was Rs. 100 for cars and Rs. 50 for two-wheelers
  • Now car or two-wheeler owners can get a maximum ‘sum assured’ of Rs. 15 lakhs by paying Rs. 750 as insurance premium
  • As per IRDAI stipulations, the owner-driver should have the choice to buy the personal accident cover for one year.

Types of insurance policies

There are two types of insurance policies in India. They are third-party (or liability-only) or comprehensive insurance policy.

Third party policy

  • The third-party insurance policy is applicable for coverage against the third-party liabilities
  • If the insured vehicle is at fault, the insurance company will pay the penalty to the third party
  • The payment of compensation will be up to the maximum limit mentioned in the insurance contract
  • The policy will cover legal liabilities as well

Comprehensive policy

  • It is also called as package policy and it will cover the ‘own damage’ as well
  • The policy will cover all kinds of damages that are applicable to a third-party vehicle insurance policy
  • You can subscribe to various kinds of add-ons as per your needs
  • The insurance premium will be high for a package policy as it will cover a wide range of risk factors

Add-on covers

By subscribing to add-on covers, you will get additional insurance benefit from the insurance company. Some of the popular add-on covers are mentioned below:

  • Engine protection – The engine protection is a very useful cover as it will cover the engine in case of flooding as well. The engine may fail due to hydro-static lock. If you try to move the vehicle through the flood waters, the water may enter the engine and it will damage the engine. A normal insurance policy will not cover such kind of damage. However, you can cover it by subscribing to engine protection cover.
  • Nil-depreciation – The nil-depreciation clause will let you claim the full value of the vehicle without decreasing the depreciation value. Zero depreciation is a popular option exercised by many two-wheeler and car owners. If your vehicle is new, the insurance company will offer nil-depreciation up to the first 5 years. As the age of the vehicle increase, the insurance premium for the nil-depreciation cover will increase.
  • Roadside assistance – You can subscribe to roadside assistance cover so that the insurance company will provide assistance to repair your car. As per the terms of the policy, the insurance company may supply the fuel or alternate vehicle until the completion of repairs of your vehicle.
  • NCB protection – When you claim your insurance policy, the NCB (No-Claim Bonus) will become zero. By subscribing to NCB protection, you can retain the NCB. The NCB will increase with every claim-free year. The maximum NCB applicable on the premium is 50%. Unfortunately, NCB will become zero even though you make first claim four years after the purchase of the policy. Hence, the NCB bonus can be protected by buying NCB protection cover.
  • The insurance company will replace key replacement – The loss or damage of keys. You should look into the premium and the real benefit that you would get from the insurance company before choosing the key replacement add-on.
  • Personal belongings cover – The personal belongings present in your car will be covered by purchasing an additional cover. However, electronic gadgets like smartphone and laptop are not covered by the add-ons.

Exclusions of a vehicle insurance policy

An insurance company applies various exclusions. When a risk is excluded from the policy contract, you will not get compensation from the insurance company. Hence, you should be aware of the exclusions.

  • Willful damage – If there is willful damage to the vehicle in anticipation of insurance claim the insurance company will reject the claim. The insurance company will process the claim and the claim may be rejected based on the negative information found through the surveyor report.
  • Driving under the influence of alcohol – If it was proven that the driver was under the influence of drugs or alcohol while driving the vehicle, the insurance claim will be rejected.
  • Driving without a valid driving license – The insurance company will not pay compensation and may reject the claim if the vehicle was driven by a driver without a valid driving license. If the vehicle was driven by a driver with learners’ license, another driver should accompany him. If no other driver accompanies him/her, the insurance claim will be rejected.
  • No intimation to the insurance company – As soon as the accident takes place, you should inform the insurance company. The delay in informing the insurance may lead to rejection of the claim or delay in processing the claim.

Selection of insurance plan

To reduce the insurance premium, you can follow the steps mentioned below:

  • Compare online policies – To select the best policy, you are advised to compare the available policies online. When you go for an online quote, you will be able to go through the features and premium of various insurance companies. The insurance premium will be low when you choose an online policy.
  • Third-party policy – You can buy a third-party policy to minimize your expenses. The premium will be low for a third-party or liability policy. If you are insuring an old vehicle whose worth is low, it is ideal to go for third-party policy.
  • Package policy – If you are insuring a brand new car, it is ideal to go for a package or comprehensive policy. You can also buy various add-ons to enhance the protection.
  • Long-term policy – By buying a long-term policy, you can reduce the premium and there will be an enhancement of benefits.
  • Review existing policy – The existing policy should be reviewed so that you can subscribe to a better policy from a different insurance company.


You can buy a bike insurancepolicy online to reduce the insurance premium and to enjoy great convenience. The insurance premium will change as per the IRDA regulations. With a third-party two-wheeler or car insurance policy, you can pay low premium and it is ideal to cover old vehicles. For new vehicles, you can buy a package or comprehensive policy so that you can make the most of your investment. As per new IRDA regulations, the vehicle insurance products will be expensive for new vehicles registered from September 1, 2018.

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