New third party insurance rules for automobiles

Come September 1 and all new car and two-wheeler buyers will have to pay more as the country’s insurance regulator has asked all general insurance companies to offer third party insurance cover for three years for new cars and five years for two-wheelers mandatorily.

The move follows a Supreme Court order last month directing insurers to provide long-term cover to vehicles in the wake of a large number of uninsured vehicles plying.

The rule will apply only to new cars and two-wheelers purchased on or after September 1. The Insurance Regulatory and Development Authority of India (IRDAI) circular is silent about its applicability on the existing vehicles.

Third party insurance is a cover against liabilities if the vehicle is involved in an accident that results in injuries or death to a third party. In this case, the insurance company pays the claim to the party in the event of an accident. It is referred to as a ‘third-party’ cover since the beneficiary of the policy is someone other than the two parties involved in the contract — the car owner and the insurance company.

The premium will be collected for all the three or five years, as the case may be, at the time of sale of insurance.