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How new vehicle owners can buy, renew 1-year own damage cover with long term third-party insurance

With the new guidelines issued by IRDAI, one will now get the flexibility to buy these two insurance covers separately, either from the same insurer or from different insurers.

, ET Online|
Jul 03, 2019, 02.33 PM IST
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You can go online, compare the prices of premium offered by different insurers and then, choose the best suitable option.
Last year, the Insurance Regulatory and Development Authority of India (IRDAI) allowed insurers to come up with three types of motor insurance plans. These were bundled insurance, standalone long-term third-party policy and long-term comprehensive insurance plan. However, IRDAI did not make it clear on how one could renew these policies in coming years.

Now, from September 1, 2019, IRDAI has left it up to the discretion of insurers to come up with stand-alone annual own damage policy (including stand-alone own damage policy for fire and/or theft) for cars and two-wheelers, both new and old.

What is standalone own damage policy?
Normally, own damage (OD) policy cover is a part of your standard motor insurance policy. What this means is that the policy will have both OD and third-party covers. Earlier, only a third-party insurance policy was available separately, not an OD policy. The OD policy could only be bought in combination with a third-party cover.

However, with the new guidelines issued by IRDAI, one will now get the flexibility to buy these two insurance covers separately, either from the same insurer or from different insurers. In such a scenario, an OD policy will be termed as 'Standalone Own Damage policy'.

Sajja Praveen Chowdary, Head- Motor Insurance, Policybazaar.com says that the own damage component covers any damage caused to your vehicle occurring due to an accident or due to any natural calamity whereas the third-party cover covers liability for injuries and damages to others for which you are responsible. "Thus, it is important for you to cover loss or damages to the vehicle as well as liabilities for injury to a third-party by opting for standard motor insurance," he added.

Important things to know about standalone own damage policy
  • According to IRDAI guidelines, insurers are not permitted to offer long-term stand-alone own damage policy, i.e., 3-year stand-alone OD plan for cars and 5-year stand-alone OD policy for two-wheelers. Therefore, you can renew the standalone own damage policy with the existing insurer or different insurer only on an annual basis.
  • Standalone OD policy can be offered to you by an insurer only if you already have a motor third-party cover or take it simultaneously.
  • One of the conditions of selling/purchasing a standalone OD cover is that the name of the insurer, policy number and the start date and end date of the third-party policy that you already have/is being bought simultaneously has to be indicated in the Own Damage policy document.
  • The pricing of a stand-alone own damage policy will remain the same as it is for the OD component of an existing standard motor insurance policy.

Last year after the introduction of the long-term motor third-party insurance for new cars and two-wheelers, an insured could buy only long-term third-party insurance, a long-term insurance policy offering both third-party cover and own damage cover for 3-years or 5-years. Or, a bundled cover with a 3- or 5-year term (as applicable) for the third-party cover and a 1-year term for the OD cover. Hence, after the completion of year from September 1, 2019, here is how new vehicle owners can renew their policies.

1. A standalone long-term third-party insurance policy
Usually, third-party vehicle insurance, which is compulsory for all vehicle owners in India, is issued for one-year. Last year, IRDAI allowed insurer to come up with 3-year third-party insurance for cars and 5-year third-party insurance for two wheelers. This type of policy is termed as standalone long-term third-party insurance policy.

How to buy/renew the policy
People who bought only long-term third-party motor insurance without OD cover can now buy own damage cover if they want to. As third-party cover is compulsory and own damage cover is not, there may be some vehicle owners who opted to buy only standalone long-term third-party insurance policy last year and did not buy the OD component. Such people will not have to renew their third-party insurance for the next two years.

However, according to new IRDAI guidelines, they will now get an option from insurers to avail standalone OD policy starting from September 1, 2019. They have the flexibility to buy standalone OD policy from any insurer they would like to; it is not compulsory to buy it from the same insurer.

Animesh Das, Head of Product Strategy, ACKO General Insurance said that new cars or two-wheeler owners (vehicle bought on after September 1, 2018) need to take long-term third-party cover for 3-years for car and 5-years for bike mandatorily. "You can now buy standalone Own Damage policy from the same or other insurer over and above third-party cover," he said. Therefore, those who have a long term third-party only cover can now buy and add the OD cover in the second or third year as well.

2. A bundled cover with a 3-year or 5-year term (as applicable) for the third-party cover and a 1-year term for OD cover.
With effect from September 1, 2018, those buying new vehicles had the option of buying a bundled cover for three years for the third-party cover and a 1-year term for the own damage cover for cars. Similarly, a bundled cover with 5-year term for the third-party cover and a 1-year term for OD cover is available for two-wheelers.

How such people can renew the policy
If you have purchased the above-mentioned type of cover last year, you can renew the own damage component from the same or different insurer. Obviously, the third- party 3-year or 5-year (as applicable) cover does not need to be renewed till the end of 3 or 5 years. Chowdary said that as per the new guidelines from the regulator, one can now renew their policy easily (the own damage component) from any of the general insurance companies. The new premium amounts will be available from September 1, 2019, giving customers the choice to buy the own damage only policy from a different insurer.

"You can go online, compare the prices of premium offered by different insurers and then, choose the best suitable option," he said. Also, if you don't want to renew the standalone OD policy, then your third-party insurance will remain in force till the end of the 3-year term.

3. A long-term comprehensive insurance policy
A long-term comprehensive policy is applicable only for new cars and two-wheelers (vehicle bought on or after September 1, 2018). It provides 3-year comprehensive covers for cars & 5-year comprehensive covers for two-wheelers. The comprehensive cover includes both vehicle OD policy and third-party insurance. Thus, apart from third-party liability cover, this type of policy covers the damage to the vehicle due to accident, calamities, fire and theft.

When to renew the policy
Those who opted for this policy last year or have bought the policy this year, don't have to renew the policy for the next two years. Moreover, at the time of renewal, they can buy the same product or any of the products mentioned above.

How should vehicle owners renew policy who bought before September 1, 2018?
The existing vehicle owners who bought insurance before September 1, 2018 and whose date of policy renewal is nearby, they can continue with their existing renewal process. They can renew their policy by either buying 1-year comprehensive cover, that includes both OD and third-party covers, or buy only 1-year third-party insurance for their vehicle.

Chowdary said that an existing policyholder who bought their vehicle before September 1, 2018 can renew their policy in the existing manner. "It means you can buy single policy with 1-year third-party cover which may include 1-year Own Damage policy. This process will remain the same for old car/two-wheeler owners every year. Also, in such case you cannot switch to new insurance products launched last year," he said.

Das said, "Suppose, if you have purchased a vehicle along with 1-year comprehensive policy on August 1, 2018, and your insurance is up for renewal, then you can only buy a 1-year policy. You cannot switch or buy any of the long-term insurance policies because these policies are only applicable to new vehicle buyers."
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