IRDAI Hikes Insurance Coverage for Automobile Owner-Drivers

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If you live in India or own a business there, read on to be informed about changes to insurance coverage in that country.

The insurance coverage for a personal accident was Rs. 1 lakh for two-wheeler owners and Rs. 2 lakh for car owners. Now, IRDAI has recommended increasing the minimum coverage to Rs. 15 lakh. The maximum coverage is now Rs. 50 lakh.

Hence, all the insurance companies should offer new insurance policies beginning October 2018. This is when the new regulations went into effect. It is also mandatory to buy compulsory personal accident coverage for the first three years of insurance.

Benefits of Higher Coverage

There are some benefits to the higher coverage.

The policyholder will get higher compensation for temporary or permanent disability, according to the terms and conditions of the policy.
If a policyholder dies in an accident, the insurance company will pay the lump sum amount to the beneficiary.

IRDAI’s Circular

As per the new circular issued by IRDAI, insurance companies will now provide higher personal accident insurance coverage to customers.
The victims of road accidents will get a higher package when there is accidental death or injury due to a traffic accident.
This judgment was made by the Madras High Court after the tragic death of P. Rajni in a road accident in 2011.
The family members of the victim filed a claim for higher compensation from the insurance company.
Rekha, the wife of P. Rajni, approached the Motor Accidents Claims Tribunal. The tribunal then awarded Rs. 53 lakh under third-party coverage.
However, the insurance company justified its stand by citing that the maximum compensation that could be offered against the policy was Rs. 1 lakh.
The maximum insurance coverage available for bike owners was Rs. 1 lakh and Rs. 2 lakh for car owners.
The court found fault with the unjustified compensation to the insured. The third party will get compensation up to Rs. 15 lakh. While the insured is taking steps to cover the third party to the highest coverage, the insured is getting less than Rs. 1 lakh as compensation.
Hence, the court asked the insurance regulator to come up with what it called “compulsory personal accident,” by which the insured will get coverage of at least Rs. 15 lakh.

Implications of the New Regulations

With the implementation of IRDAI’s new regulation the insured will bear a larger burden. That’s because the insured will need to pay at least Rs. 750 per year in order to get coverage for compulsory personal accident of Rs. 15 lakh.
Further, insurance companies will need to come up with robust plans to enhance the personal accident coverage.
Insurance companies will also need to offer coverage up to Rs. 50 lakh. However, customers will larger premiums to get additional coverage.
The insurance company will be able to provide higher coverage based on the earning potential of the insured.
The sum assured will be proportional to the insurance premium.
Now, motorists have the liberty to choose higher compensation so that they can secure their family members.
The coverage is applicable for motorcycle owner-driver only.
If the insured wants coverage for the pillion on a two-wheeled vehicle, they will need to purchase add-on coverage.

Types of Vehicle Insurance Policies

There are three types of vehicle insurance policies in India:

Two-wheeler insurance policy
Car insurance policy
Commercial vehicle insurance policy

Two-Wheeler Insurance Policy

Two-wheeler insurance is the most popular type of vehicle insurance in India. That’s because most households in India own one or two bikes. The insurance policy will cover various kinds of risk factors for two-wheeled vehicles.

A two-wheeler can be covered by either a third-party insurance policy or with comprehensive insurance coverage.
Third-party cover is the least expensive and best for an older vehicle.
It will also offer coverage for a third-party vehicle.
The policy will cover damage to the third-party property.
The death or injury of a third-party will also be covered.
The personal accident coverage was previously a maximum of Rs. 1 lakh.
With the introduction of new regulations, all the insurance companies in India will now offer a minimum of Rs. 15 lakh as compensation.
If you buy a new vehicle after September 1, 2018, you must buy a compulsory personal accident (CPA) coverage by paying Rs. 750 annually for at least three years.
Therefore, there is now an additional financial burden on vehicle owners.

Package Policy

A package two-wheeler policy will come with features that are included in the third-party policy. It will also include additional features to offer maximum protection to the policyholder.

The CPA terms are the same for the third-party policy as well as for the package policy.
Earlier, the third-party coverage was the same in both third-party policies and comprehensive policies.
Now, in addition to the third-party coverage, you are required to cover personal accidents for a minimum of Rs. 15 lakh.
The maximum CPA that you can subscribe to under the package policy is Rs. 50 lakh.
You can also subscribe to various kinds of add-ons such as engine protection, nil depreciation, no-claim bonus protection rider, and more to get the best insurance coverage.

Car Insurance Policy

A car insurance policy is available under a third-party category or a comprehensive policy.
You can choose a policy in the same way as you choose a bike insurance policy.

Third-Party Cover

With third-party coverage, the maximum personal accident compensation was Rs. 2 lakh.
After the introduction of new rules and regulations, the minimum coverage has been increased to Rs. 15 lakh.
The policyholder can subscribe to higher coverage up to Rs. 50 lakh by paying an additional premium.
There will no longer be own damage coverage. In other words, if your vehicle is damaged in the accident or it was stolen, the insurance company is not liable for damages or compensation.
Therefore, an older car whose worth is negligible can be covered by a third-party car insurance policy.

Comprehensive Car Insurance Policy

A comprehensive car insurance policy offers the highest level of protection.
The package policy is expensive. However, the insurance company offers discounts on various aspects.
The insured can choose features to make their insurance premium more manageable.
The insured’s car will be protected from various kinds of natural disasters such as floods, cyclones, rain, fire, and lightning.
Additionally, the car will be insured against man-made disasters such as riots, strikes, and so on.
Certain risk factors which are not covered by the insurance policy can be overcome by purchasing an add-on.
Engine protection, collision coverage, nil depreciation, roadside assistance, accessories coverage, and medical expenses will be covered by the policy.

Commercial Vehicle Insurance Policy

Vehicles which do not come under the personal-use category can be covered by a commercial vehicle insurance policy.
There are various kinds of commercial vehicles, such as trucks, buses, agricultural vehicles, and multi-utility vehicles. These will be covered under a commercial vehicle insurance policy.
The personal accident coverage rules will apply per the terms and conditions of the insurance policy.

How to Buy the Right Type of Vehicle Insurance Coverage

To buy the right type of insurance policy, follow the tips and tricks offered by experts.

Buy online. This will save you time, effort, and money.
Review your needs.
According to the new regulations, you will need to pay at least Rs. 750 per year to get personal accident coverage of Rs. 15 lakh. Additionally, you must purchase the policy for at least three years for any car you register after September 1, 2018.
Use an online insurance calculator to calculate your premium. You can find how the premium will increase by including various risk factors. In this way, you can choose the best policy for you.
Bike owners can choose a multi-year insurance policy. When they do, the premium will be fixed for duration of the contract. Therefore, you can subscribe to a three-year bike insurance policy and save money on your premiums.

Conclusion

Vehicle insurance is mandatory. However, you need to buy the right type of policy for the risk factors you face. Keep in mind that the compulsory personal accident (CPA) will increase your premium. However, it will protect your financial interests to the maximum possible extent. Too keep costs down, choose online bike insurance. This will reduce your overall insurance premium costs.