Motor Insurance’s relevance in India and its sheer benefits are unquestionable. Irrespective of what vehicle you drive, be it a two-wheeler or a car, an insurance cover not only brings peace of mind but also provides multiple benefits.
- You get a protective cover that takes care of damages due to human-made or natural reasons.
- Covers damages, financial loss, and injuries caused by you to another person or property during accidents.
- It also provides a cover against theft and other unexpected risks.
- Get relief during hospitalization, legal benefits and could help in payment of family expenses.
As per the Motor Vehicle Act, 1988, it is mandatory for all vehicle owners to have at least a third-party insurance policy. Driving without an appropriate insurance cover invites a substantial penalty. A large number of Indians, realizing the immense value a motor insurance cover offers, are now willing to pay attention to it.
The Positive News for Policy-Holders
IRDAI, Insurance Regulatory and Development Authority of India, has now
allowed insurance companies to issue ‘Stand-Alone Own-Damage Insurance Policies’ for cars, two-wheelers, both new and old. It is widely regarded as positive news for you, the policyholder.
“Consequently, effective September 1, 2019, the issuance of bundled policies for cars and two-wheelers will not be compulsory. Further, insurers will have the option to offer package policies, in addition to stand-alone own-damage and third-party policies.” – The IRDAI.
The Own-Damage Policy
- An OD (Own-Damage) motor insurance policy, covers any damages your vehicle suffers due to accidents, such as fire, vandalism, road collisions and theft of the vehicle or its parts. It also covers natural calamities, like floods, earthquakes, and riots.
- The third-party motor insurance cover is mandatory for all vehicles running on Indian roads; however, an OD policy is optional, and it must be renewed every year.
The Existing Situation
- Most insurers only offer OD policy as a part of the package, including the TP (third-party cover) and not as a stand-alone product.
- If one wishes to buy an Own-Damage motor insurance policy, he or she is forced to buy it as a combination with already purchased mandatory third-party cover and that too from the same insurer.
- This arrangement means, as a policyholder, you are locked-in with your existing insurer, cannot shop around for more competitive premiums and better deals.
The Changes from 1st Sep’19
- Insurance companies will be allowed to issue stand-alone annual Own-Damage (OD) covers for two-wheelers and cars, both new and old. It will not be compulsory to issue bundled policies. (third-party plus Own-Damage covers) Insurers can still offer package policies.
- Policyholders will have the option to renew their OD policies (out of bundled covers) due on or after 1st Sep’19, with the same insurer or different insurance company, on an annual basis. While buying an OD cover, you must have a valid TP cover, or it should be bought simultaneously. Insurer’s name, policy number, start and end date of the TP policy has to be mentioned.
- Stand-alone Own-Damage (OD) covers will not be issued for the long term.
The Benefits to Policyholders
- Flexibility to buy OD cover at your discretion. TP policyholders can purchase a stand-alone Own-damage insurance cover at a later date from a new insurer.
- An option to renew your OD cover from an insurer of your choice and not necessarily continue with the TP cover provider.
- It’s not necessary to buy the OD cover from the same insurance company, you get multiple options, and it will lead to an increase in your bargaining power.
- Better pricing and cost-effective OD covers from insurers due to the competition. The premiums are likely to reduce.
- Insurance companies may come up with covers with more add-ons to attract new customers.
The IRDAI’s decision to allow the purchase and sale of stand-alone Own-Damage motor insurance covers is a welcome step, and it has been appreciated as a policyholder-friendly move. It is also seen as a step towards bringing fair pricing benefits to customers.
Motor Insurance provides you with a protective cover and takes you out of “the at-risk” category. It should not be merely seen as a legal requirement; rather, it must be understood as a critical tool to safeguard your hard-earned money and ensure a worry-free driving experience.