IRDAI regulations: Mandatory coverage for private policyholders explained

IRDAI regulations: Mandatory coverage for private policyholders explained

As a car owner in India, it’s crucial to understand the insurance regulations set by the Insurance Regulatory and Development Authority of India (IRDAI). These rules protect you, your vehicle, and any third parties involved in an accident. Let’s discuss the specifics of what coverage is mandatory under IRDAI regulations for car insurance.

The basics: Third-party liability coverage

First and foremost, every car owner in India must have third-party liability coverage. This is non-negotiable. You could face serious legal consequences if caught driving without this basic insurance. 

So, what exactly does third-party liability cover? It protects you financially if you’re responsible for causing damage to someone else’s property or injuring/killing someone in an accident. The insurance company will foot the bill for any legal liabilities arising up to a specific limit.

For instance, you accidentally rear-ended another car at a traffic light. The third-party liability portion of your car insurance will cover repairing the other person’s vehicle. If the driver or passengers in the other car are hurt, your insurance will also cover their medical expenses or provide compensation in the unfortunate event of a death.

It’s important to note that third-party coverage does not cover damage to your car. You’ll need a more comprehensive policy

Compensation calculations for third-party losses

If you’re wondering how much compensation the insurance company will provide in various third-party liability scenarios, here’s a quick breakdown:

  • Property damage: The insurer will pay out based on the extent of the damage, up to a maximum of Rs. 7.5 lakhs. 
  • Death of a third party: The compensation amount will be calculated based on the deceased individual’s net worth, as determined by the Motor Accidents Claims Tribunal.
  • Injury/disability of your paid driver: If you have a Personal Accident Cover policy, the insurer will pay out the sum insured to your driver if they are injured or killed in an accident involving your insured vehicle.
  • The bottom line is that third-party liability coverage is an absolute must, both to comply with the law and to protect yourself financially in case of an accident.

Going beyond the basics: Comprehensive coverage

While third-party liability insurance is the only mandatory coverage, opting for a comprehensive car insurance policy is highly recommended. As the name suggests, comprehensive coverage offers a wider range of protection for your vehicle.

In addition to third-party liability, a comprehensive policy typically covers:

  • Damage to your car from an accident (regardless of who was at fault)
  • Theft of your vehicle
  • Damage from natural disasters like floods, cyclones, earthquakes, etc.
  • Damage from man-made calamities like riots, strikes, malicious acts, etc.  
  • Damage from fire or explosion

A comprehensive policy has your back in most scenarios where your car could suffer damage. It’s the smart choice for anyone who wants complete peace of mind on the road.

Exclusions: What your car insurance won’t cover

While comprehensive car insurance does cover a wide range of situations, there are still some exclusions to be aware of. Most policies will not cover:

  • Normal wear and tear on the vehicle
  • Mechanical or electrical breakdowns not caused by an accident
  • Intentional damage caused by the policyholder
  • Damage that occurs while the car is being driven under the influence of alcohol/drugs
  • Damage incurred while using the car for illegal activities like racing
  • Damage from driving outside the geographical limits specified in the policy
  • Damage from accidents caused by the driver’s negligence or violation of traffic rules

It’s crucial to read your policy documents and understand what is carefully and isn’t covered. That way, you won’t be caught off guard if you try to claim an excluded situation.

Recent IRDAI rule changes for car insurance

The IRDAI periodically updates its guidelines to serve policyholders better. Here are some of the most recent changes to be aware of:

  • New cars no longer must have a long-term policy (3+ years). Owners can now opt for a one-year standalone own-damage policy and a three-year third-party liability policy.
  • The No Claim Bonus (NCB) structure has been standardized across all insurers. Previously, companies could decide their own NCB grids for long-term policies.
  • If your car is stolen or considered a total loss, you must send your Registration Certificate (RC) to the insurance company to cancel it.
  • “Compulsory deductibles” have been renamed to “standard deductibles.” These are now fixed at Rs. 1000 for cars up to 1500cc and Rs. 2000 for cars above 1500cc.
  • The IRDAI now recommends a minimum passenger insurance cover of Rs. 25,000 for all passengers in the insured vehicle.
  • Staying updated on these rule changes is a good idea, as they could impact your coverage and claims process.

The importance of timely policy renewals

To ensure continuous coverage, renewing your car insurance policy before it expires is vital. The IRDAI has some specific guidelines around policy renewals:

  • If you fail to renew within 30 days of expiry, you’ll lose any accumulated No Claim Bonus.
  • The insurance company is not liable to pay for any damages when the policy is inactive. So, if you have a coverage lapse and get into an accident, you’ll have to pay out of pocket.
  • To avoid gaps in coverage, set a reminder to renew your policy well before the expiration date. Most insurers now allow online renewals, making the process quick and convenient.

Total loss claims: When the damage is too severe

In some extreme cases, a car may be damaged so severely that it’s considered a “total loss” or “constructive total loss.” This usually happens when the cost of repairs exceeds a certain percentage of the car’s Insured Declared Value (IDV).

As per IRDAI rules, if the estimated repair costs are more than 75% of the IDV, the insurer will declare it a total loss. The policyholder will receive the IDV minus any applicable deductibles in this scenario.

It’s important to note that the IDV is not a fixed value. It’s based on the car’s ex-showroom price but depreciates over time. Insurers use a standard depreciation schedule, the IRDAI sets, to determine the annual IDV.

The Bottom Line

A thorough understanding of IRDAI’s car insurance regulations is essential for all vehicle owners in India. Following the mandatory coverage rules protects you and others financially. Opting for comprehensive insurance delivers complete peace of mind on the road. Staying updated on policy requirements and timely renewals also ensures continuous protection as per the guidelines. When it comes to motor insurance, being compliant and informed places policyholders in good stead.

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