Effective August 01, 2020, insurance companies are no longer allowed to sell multi-year comprehensive motor insurance policies. Through a circular issued in June 2020¹, the Insurance Regulatory and Development Authority of India (IRDAI) withdrew the long-term comprehensive insurance policies offering both, third party and own-damage covers. The primary drivers for this change include:
- Addressing consumer concerns on pricing; and
- Providing flexibility to consumers with respect to service-providers
Accordingly, as a new vehicle buyer, you are no longer required to buy a standard/fixed multi-year comprehensive motor insurance policy. Instead, you will be able to choose a combination of multi-year third party policy and a single-year own-damage policy. For renewals, you can choose a single-year policy for third party, own-damage or a comprehensive one.
How does this benefit you?
This new rule by the IRDAI is a prudent one not only because it reduces the upfront car insurance cost for you but also provides you with the flexibility to switch your insurance provider in the second year. In other words, this move will now provide car-owners with a benefit of choice, which exists due to the presence of multiple insurance service providers in the current competitive market. Not just through the benefit of choice, a single-year own damage policy is also something that works in your favour in other ways.
Single year policies and reducing Own-Damage premium
The own-damage premium is determined basis the RTO, CC and the Insured Declared Value(IDV) of your vehicle. The IDV is nothing but the amount you are entitled to receive from your insurer in case your car suffers total damage or in case of a theft. The IDV is determined taking into account the year on year depreciation in the value of your car.
The following table will help you understand the rate of depreciation applied to the motor vehicles over the years –
|Age Of The Vehicle||Depreciation|
|Less than six months||5%|
|Between six months and one year||15%|
|Between one year and two years||20%|
|Between two years and three years||30%|
|Between three years and six years||40%|
|Above five years||50%|
With increasing depreciation, the IDV and own-damage cover gradually come down over a period. As the coverage goes down, so does the insurance premium. In the multi-year policy scenario, you would have paid a higher amount for subsequent years despite the vehicle getting old.
Moreover, if you are a diligent driver and do not make frivolous claims on your insurance, you can avail discounts on your car insurance premiums while renewing the policy in the subsequent year. This is known as the No Claim Bonus (NCB) benefit and it can reduce your insurance premium by up to 50% if there are five consecutive claim-free years.
If you take in to account the savings from not buying a multi-year own-damage policy as well as the savings from lower premiums and discounts from NCB, you will certainly end up saving a good deal of money.
While all of this holds true, you also need to find a trustworthy insurance service-provider.
Enter, Finserv MARKETS
Finserv MARKETS makes buying car insurance online a smooth and hassle-free process for you. It allows you to choose single-year comprehensive car insurance plans based on your pocket and coverage necessities. You can use the car insurance calculator to determine the premium amount on your single-year policy.
Furthermore, with Finserv MARKETS, there is no tedious paperwork involved, and you can get your new or an old car insured in just a few minutes. Other benefits include a quick renewal process, cashless claim settlements at any of the network garages, 24×7 customer assistance, car roadside assistance, and much more! Moreover, you can extend the coverage of your car insurance with additional riders as needed/required.
What’s more!? Now, you can buy your car insurance policy using the Finserv MARKETS app, which offers a host of features and benefits besides offering exclusive app-only rewards, a wide variety of products, 24×7 chatbot assistance, and lastly, a name that you can trust!
Whether you want to protect your brand new vehicle with comprehensive motor insurance, secure your family’s future with a reliable life insurance policy, or build your wealth with an appropriate investment plan, Finserv MARKETS has you covered.
Image Credit: Finserv MARKETS