Planning to buy a car or bike? Here's why you need to pay more now

If you are planning to buy a car now, you will have to shell out a little more - courtesy new insurance regulations. The new insurance regulations have been implemented on the directions issued by the IRDAI after the recommendation of a Supreme Court panel. The Insurance Regulatory Authority of India (IRDAI) had advised all general insurance companies to design long-term third party products for private vehicles. The IRDAI had recommended a five-year third-party policy for two-wheelers and three-year policy for four-wheelers.

The SC panel was concerned over poor compliance of third-party insurance of vehicles. As per estimates, over more than half of the vehicles plying on roads do not have a third-party insurance.

The new insurance regulations have come into effect from September 1. Now, a new two-wheeler buyer will have no choice but to opt for a five-year policy and a four-wheeler buyer will have to opt for three-year policy.

Due to this, the car dealers in the national capital region reported a surge up to 40 per cent in car booking on August 31.

Since a new buyer will have to opt for long-term insurance, he or she will have to shell out three to four times more on the premium amount. For an example, if you are buying a Hyundai i20 variant, the one-year premium was around Rs 12,800 while now you will have to pay Rs 46,900 - almost four times the earlier amount.

What is a third-party insurance?
 
Indian Motor Vehicles Act makes it mandatory for a vehicle to have a third party liability cover under its insurance policy. A third party car insurance provides cover against any legal liability caused to a third party when you are at fault.

"There were a lot of vehicles on the road with no insurance which is mandated by the law. So, there was no way to award compensation to third parties who were affected by vehicles," Deepak Yohannan, CEO, MyInsuranceClub, told Zeebiz.com on the need of making long-term insurance mandatory.