IRDAI Guidelines for Motor Insurance Policies

IRDAI (Insurance Regulatory and Development Authority of India) has issued guidelines that insurers offering vehicle insurance should abide by. Also, it is mandatory for all vehicle owners to buy a vehicle insurance or opt for motor insurance renewal plan and abide by all guidelines set as per IRDAI.

A vehicle insurance certificate is issued by the insurance provider to the insured after purchase of the vehicle insurance or its renewal. This insurance certificate is mandatory for the vehicle owners to carry while driving the vehicle. Violators may be penalised with hefty charges or even imprisonment. Moreover, an individual’s license and vehicle’s registration documents may also be suspended.

Here are some of the crucial guidelines set by IRDAI for vehicle insurance plans:

  • 3rd party liability insurance

It provides compensation to third parties in the case of vehicle property damage or bodily injury due to the insured’s motor vehicle. All the vehicles, be it a 4-wheeler or 2-wheeler should mandatorily have a third-party insurance cover.*

  • Comprehensive policy

This insurance offers extended cover to the insured. Alongside meeting the third-party liabilities, this policy also provides for any injury or damage caused to the insured and his/her vehicle.*

  • Factors for insurers to account for while insurance premium calculation

Fundamental factors that impact the premium amount for vehicle insurance are:

  • Engine’s cubic capacity
  • Vehicle’s age
  • Vehicle’s model

Besides the above factors, insurers also factor aspects like driving history, presence of safety device in the vehicle, etc. when quoting the final premium. This inspection is addressed by the term IDV or Insured Declared Value.

IDV is one of the crucial factors taken in consideration by insurers. Based upon the IDV, the premium calculation and sum assured for the insurance is decided. The calculation for IDV is performed based on the vehicle’s current market valuation. Another crucial factor considered is depreciation. IRDAI has clearly stated that depreciation rate must be factored in. This is one of those factors that majorly impacts the claim amount. In simple words, the older the vehicle, the lower is the claim amount. For all vehicles less than 6 months old, 5% is the depreciation rate. On crossing this mark, the depreciation rate rises to 15%. After 1 year completion, the rate further elevates to 20%. After this, the depreciation rate rises annually by 10%. Note that IRDAI has also mentioned the depreciation rate for different parts in a vehicle. Please feel free to visit the official website of IRDAI for further details.

  • NCB transfer from one insurance provider to another

IRDAI mentions that policyholders will not miss out on NCB status on switching to another insurer during motor insurance renewal.

  • Third-party insurance

As per IRDAI, all insurers are required to purchase a third-party policy for a compulsory 5-year period.

Here are some essential documents to be kept handy when driving:

  • PUC (Pollution under control) certificate
  • Insurance certificate
  • Driving License
  • Vehicle registration copy
  • Exclusions from vehicle policy

Vehicle insurance policy will be considered invalid in the listed cases:

  • On driving a vehicle with invalid driving license.
  • On driving a vehicle in an intoxicated condition or under the influence of any illegal substance or drug.
  • On indulging in an accident due to high speed or traffic law violation.
  • On using the vehicle for any unlawful or illegal activity.
  • On witnessing any damage due to radioactive or nuclear elements.
  • On reduction of the vehicle’s monetary value owing to wear and tear.

* Standard T&C Apply

Bottom line

Whether opting for the online or offline mode to buy or renew motor insurance, ensure to note the above crucial points. Also, before opting for the motor insurance, use a motor insurance calculator to compare amongst different insurers to opt for the one offering a suitable deal at the lowest premium. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read sales brochure/policy wording carefully before concluding a sale.