Vehicle insurance: Third-party cover is essential but may not be sufficient

Vehicle owners who can afford a comprehensive motor insurance cover should opt for it to take advantage of the recent cost reductions

Recently, the Insurance Regulatory and Development Authority of India (IRDAI) directed insurance companies to make third-party (TP) motor insurance plans easily available to customers. TP insurance cover is mandatory for all vehicles and someone who does not have one can be detained until such time as insurance documents are produced. While a TP cover is the very least that a vehicle owner should buy, it is advisable that those who can afford one should buy a comprehensive motor cover.  

The Supreme Court Committee on road safety recently asked states and Union territories to carry out periodic checks to see if vehicle owners have TP cover. Often insurance companies make the purchase of a TP cover a cumbersome process.  They are also at times reluctant to provide a TP cover in areas that are highly accident prone. “Insurers shall ensure the easy availability of motor TP insurance and in no case can a request for a TP cover be denied,” states the IRDAI directive.

According to the Motor Vehicle Act, all public, private and commercial vehicles running on roads must have TP insurance. A report by the General Insurance Council of India states that approximately 60 percent of automobiles in India are uninsured. “People are reluctant to buy TP motor insurance policies as they see it as an avoidable expenditure. As their travelling distances are usually short, they consider buying such a policy to be futile. Some still don’t trust that the claim will be paid by the insurance company when the need arises,” says, Rajiv Kumar, MD & CEO, Universal Sompo General Insurance.

TP insurance basically provides coverage against any financial liability to the vehicle owner arising from harm to a third person, including demise, disability, bodily injury, and damage to the third person’s vehicle or property. Insurance companies compensate the insured to the extent of their legal liability. The amount of compensation for damage to vehicle or property is capped at a maximum of Rs 750,000, according to the Indian Motor Tariff guidelines. “Having third party insurance can save you from legal repercussions. It also gives peace of mind to anybody owning or driving a motor vehicle, especially if a traumatic situation arises," says Kumar of Universal Sompo.

At the time of buying a third party motor insurance, share correct details of your vehicle. Also, make yourself aware of what exactly your policy covers, including all terms and conditions.

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Experts, however, say that those who can afford it should opt for a comprehensive motor cover. They should take the benefit of declining costs of comprehensive cover. Several insurers have reduced their Own Damage (OD) part of motor insurance premiums by 5-20 per cent. The reduction has happened due to IRDAI's Motor Insurance Service Provider (MISP) guidelines, implemented from November 1, 2017. “The new regulations have created some space for insurers to increase OD discounts," says Tarun Mathur, director, Policybazaar. Companies like ICICI Lombard General Insurance Ltd, Universal Sompo General Insurance and Bajaj Allianz General Insurance Co. Ltd have already reduced their premiums. “The reduction in prices is chiefly owing to the impact of goods and services tax (GST)," says Amitabh Jain, head–motor and health underwriting and claims, ICICI Lombard General Insurance. Vehicle owners opting for a comprehensive cover should make the most of this development.