Why Should You Buy a Long-Term Car Insurance Policy?

Imagine what will happen if you don't have car insurance and meet with an accident? First, you will have to bear all the losses & expenses incurred due to the car accident. Second, you will be liable to pay a fine or will be imprisoned because driving an uninsured car is illegal in India. To avoid such circumstances, the Motor Vehicles Act, 1988 has made long-term third-party car insurance mandatory for newly-purchased cars.

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Long-term Car Insurance in India

As per the Motor Vehicle Act of 1988, it is mandatory to have a third-party liability cover for all cars plying on public roads. Third-party cover protects third-party individuals in road accidents financially if the insured vehicle has caused them physical injuries, vehicle damages, property damages, or death. You can get third-party cover for your four-wheeler under both third-party car insurance and comprehensive car insurance.

However, these insurance policies usually come with one-year validity. You need to renew your motor insurance policy before it gets expired to ensure continued coverage for your car. But, many of us find it difficult to renew our insurance year on year. Therefore, to avoid this yearly hassle, you can avail a long-term motor insurance policy for your car.

As the name states, a long-term car insurance policy is a four wheeler insurance policy that comes with a validity of 3 years. This policy is also known as a multi-year car insurance policy as it provides coverage to your car for multiple years. You can either opt for standalone 3-year third party car insurance or 3-year third party insurance with 1-year own damage cover.

In fact, from September 2018, the Insurance Regulatory and Development Authority of India (IRDAI) has mandated new car owners to have long-term third party insurance policies for their vehicles. If you violate this law, you may have to face legal consequences. However, people who've purchased their car before September 2018 have a choice to opt for long-term car insurance. 

For instance, Mr. X is driving an uninsured new car and injured a pedestrian in an accident. In this situation, he will not only be liable to pay compensation to the third party victim but also invite a fine and/or jail imprisonment. In case he had bought a long-term car insurance policy for his new car, he could have raised a claim and prevented the financial loss & paying the fine.

You May Also Read: Know About Third Party Liability Insurance

Benefits of a Long-term Car Insurance Policy

A long-term car insurance policy helps in reducing the number of uninsured vehicles on the road and thereby, improving the possibilities of third-party claim settlement. Let us understand the advantages associated with buying a long term motor insurance policy-

1. Convenient- If you are one of those people who forget to renew their policy on time, a long-term car insurance policy is the solution for you. This policy helps you to get rid of the hassles involved in the renewal of a car policy annually.

2. Discounts on Premiums- Insurers often offer lucrative discounts on premiums in case of long-term car insurance policies. This happens because these car insurance policies help insurers to reduce their administrative costs and policy issuing costs. Further, you may get additional discounts on your premium if you have an anti-theft device installed in your vehicle.

3. No Claim Bonus (NCB): A No Claim Bonus or NCB is a discount on the car insurance premium given to the policyholder for not raising a claim during the previous policy tenure. With a long-term car insurance policy, you can avail of higher NCB in comparison to a standard car insurance policy. 

4. Avoid Risk of Non-Renewal- In case you need to repair or replace your car or its parts after you have surpassed your policy renewal date, you will have to bear the expenses out of your own pocket. This happens because the coverage is not available after the policy expires. With a long-term car insurance policy, there are lesser chances of you forgetting to renew your policy as the renewal will be due after 3 years.

5. Time and Energy Saving- A standard or short-term car insurance policy requires you to submit an examined review of your car’s condition during its annual renewal. A long-term motor insurance policy saves the time & effort of having to conduct this examination every year.

6. Changes in Premium- The third-party premium rates are determined by IRDAI every year. If there is an increase in the third-party premium rates by IRDAI, then there will be no effect on your multi-year car insurance premium for three years. This is because your policy renewal will come after 3 years and until then your premium cannot be changed.

You May Also Read: Benefits of Third Party Car Insurance

How to Avail Benefits of a Long-term Car Insurance Policy?

To avail the benefits of a long-term car insurance policy, you must pay your premium regularly. You must always buy a long-term insurance policy for your new car even if you have purchased it second-hand. Also, make sure to have your vehicle documents like- RC, PUC certificate, and driving license, etc. with you while driving the car to avoid earning a traffic challan.

Legal Penalties/ Fines for Driving a New Car without Long-term Third Party Insurance

Under Section 81 of the Motor Vehicles Act, 2019, the penalty or fines for driving a new car without long-term third party insurance are-

• First Offense- Rs.2,000 as fine and/or imprisonment of up to 3 months
• Second Offense- Rs.4,000 as fine and/or imprisonment of up to 3 months

Conclusion

A long-term car insurance policy has proved to be worthy of every penny spent on it. Besides, you don’t get a choice to skip buying it for your new car. Hence, buying long-term car insurance policies are advantageous in all aspects and are ideal for people who forget to renew their policies annually.