We all are aware of the importance of having a good motor insurance and how it eases our burden at a time of an emergency, but did you know that all vehicle insurance companies and their motor insurance policies are bound by law? Which means even the slightest change in insurance rules can affect your motor insurance policy premium. As per order of Supreme Court, the insurance regulator has directed all vehicle and commercial vehicle insurance companies, rather general insurance companies to offer the long-term third-party vehicle insurance covers to all the vehicles bought on or after 1st September 2018.
What Changes?
The new rule makes it compulsory for every vehicle owner to have a long-term or multi-year policy while it also detains them from riding a vehicle on the road without the third-party insurance.
The following states how this rule is going to affect a policyholder’s motor insurance premium.
Premium Outflow – The net outflow of the policyholders will be comparatively more in the beginning. Instead of paying premium amount every year, the policyholders will now pay it as an upfront lump sum. Owing to the new rule, there is an increase in the policyholder’s outflow in the first year but no such premium has to be paid by them in the second and third year.
Hike in TP Tariff – The premium for new cars except for those below 1000 cc will go up
- Below 1000 cc – Policyholders under this category will seem to gain by this new motor vehicle rule as the new long-term TP rate will witness a slight decrease in its total lump sum for 3 years.
- Over 1000 cc but below 1500 cc – The new rule will result in a hike in the long-term TP rate, making the policyholders pay extra upfront by the end of 3 years.
Over 1500 cc – The policyholders under this category will have to pay extra upfront by the end of the 3 years long-term.
Premium paid – The premium for motor insurance will have to be collected for the entire term of 3 or 5 years right at the time of purchase and would be recognized on an annual basis.
What hasn’t changed?
The things that still remain the same after the new rule are as listed below.
Policy Renewal – The said new rule isn’t applicable to policies that were bought before 1st September 2018 and, therefore, has no effect on the motor insurance renewal of policies existing before it.
Own Damage – The new policy demands an upfront lump-sum premium in the case of third-party liability. But it has no effect on the own-damage feature of the policy.
IDV – The new rule doesn’t affect the Insured’s Declared Value of a policyholder’s vehicle. It is still determined on the basis of the listed selling price, brand and model of the car.
No-claim Bonus – Since NBC is applied only on the OD part of the policy it may not be affected by the new rule.
Find out the impact of the new rule on your premium by browsing through sites of reputed vehicle insurance companies like Bajaj Allianz General Insurance. Their easy-to-use motor insurance calculator can help you understand your premium payouts even better.