Five things to know about third-party motor insurance premiums


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Third-party motor insurance premiums rates will increase starting this month after a two-year wait. The final third-party liability premium rates were issued last week by the Ministry of Road Transport and Highways and the Insurance Regulatory and Development Authority of India (IRDAI).

Depending on the engine size of your vehicle, the increase for owners of cars and two-wheelers ranges from 0.1% to 20.7%. (see table). For instance, third-party vehicle insurance premiums for private cars with 1,000–1,500cc engines will increase to Rs 3,416, an increase of Rs 195. Additionally, third-party rates for bikes with engines between 150 and 350cc will cost you Rs 173 extra, up from Rs 1,193 to Rs 1,366 previously.

This change was essential in the eyes of the insurers. “Given the growth in inflation and the large increase in the award amounts given by courts, it has been long anticipated. Although the last two years’ claims data was not indicative, the hike’s appropriateness can only be assessed after this year, according to Shanghai Ghosh, CEO and Executive Director of Edelweiss General Insurance.

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Purchasing third-party auto insurance is required.

The part of your car insurance that is required by law is a third-party liability; without it, no vehicle is allowed to operate on public highways. Simply put, it protects the policyholder from having to pay damages to another person as a result of an accident that the vehicle was involved in (third-party). Any damage to a third party’s property that your car may have caused will also be covered by the insurance.

The second element, own damage, covers any costs you could have if your automobile is damaged. You are not required by law to buy this protection, though.

Annual premium increases are halted because of COVID-19

Every year in March, the IRDAI typically develops a proposed third-party fee structure, which is subsequently finalized at the end of the month. Usually, final rates are less than those that have been recommended. This time, the insurance regulator proposed rate increases in March but did not release the final rates; instead, the road transport ministry announced the changes, which became effective on June 1.

Additionally, the rises have been implemented after two fiscal years; the most recent one was in 2019–20. By the end of March 2020, the COVID-19-induced lockdown made it impossible to implement the yearly third-party fee increase. “People stopped buying cars because of the COVID-19 lockdown, therefore existing cars were utilized instead. It would not have been feasible to raise third-party premiums during such challenging times. These increases, following a COVID-19-caused hiatus, are generally in line with expectations, according to Balchander Sekhar, co-founder of the internet insurance marketplace RenewBuy.

Are the increases in third-party premiums significant?

All vehicle owners will undoubtedly feel the pinch because third-party insurance is required, but bike owners in all but one category will be most affected. It varies between 11 and 21 percent for two-wheeler owners. Since customers will be paying these premiums annually, an increase of over 20% qualifies as significant, according to Saroj Satapathy, Chief Operating Officer of JB Boda Insurance and Reinsurance Brokers. Only the premiums for motorcycles with engines between 75 and 150 cc have actually decreased by Rs 38. Since premium increases will range from 0.1-6 percent, they won’t be as onerous for auto owners. This change was essential in the eyes of the insurers.

Electric two-wheeler insurance rates have increased.

The third-party premiums for electric vehicles (EVs) will increase by 0.1% to 20.6%. Again, the two-wheeler market will experience the greatest percentage-wise impact (with the exception of the 3–7kW engine capacity sector). A 7.5% discount will be available for hybrid electric vehicles. This year, discounts have been offered for hybrid electric automobiles. These are sensible steps that will increase sales in these markets, according to Ghosh of Edelweiss.

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Why it’s crucial to get own damage insurance

Even though purchasing your own damage component is not required by law, you still need one to protect yourself against monetary loss due to mishaps and other dangers like fire, burglary, and natural disasters. Due to the increase in third-party premiums, two-wheeler owners in particular shouldn’t be tempted to abandon their own damage coverage.

Making ensuring that all of your possessions are adequately insured is a wise financial move. Own damage insurance is designed to protect the value of your automobile or two-wheeler after an accident without breaking the bank for repair or replacement costs, regardless of an increase in third-party premiums. There should be no trade-off between these two distinct types of dangers. Because an accident might result in both, third-party responsibility and own damage risks are actually connected and associated. Therefore, ensure that you have enough protection against both types of risk, advises Srinath, co-founder, and director of SANA Insurance Brokers.


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