Friday, August 31, 2018

New vehicle owners have to buy long-term cover

New vehicle owners have to buy long-term cover

From September, buyers of new cars and two-wheelers must purchase upfront insurance cover for at least three and five years, respectively. Long-term premium payments would proportionately raise the initial outgo on new vehicles, but save consumers the trouble of yearly renewals. 

As the practice of annual premium payments gets a quiet burial, the initial insurance cover on a new private car exceeding 1500 cc will be at least Rs 24,305, up from abase of Rs 7,890 now. For bikes with an engine capacity beyond 350 cc, the buyer must pay Rs 13,024 against Rs 2,323 currently. Insurance premiums can vary across models. 
On July 20, the Supreme Court ordered that third-party insurance cover for new cars be for a period of three years, and five years for two-wheelers. The order would apply to all policies sold from September 1. The SC directed insurers to offer long-term, third-party covers because of lower penetration, although insurance is mandatory for all road-worthy vehicles. 

As vehicles age and depreciation accelerates, many owners either tend to skip annual renewals, or buy policies that do not cover risk totally. “This initiative goes toward improving penetration in the overall sector and more vehicles are going to be covered,” said Sanjay Datta, head of underwriting, ICICI Lombard General Insurance. “The question of uninsured vs insured will go away. The extent of insurance cover on third-party vehicles will be bigger and better.” 

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