The honorable Supreme Court of India has enforced the law against mandatory long-term motor insurance for all new vehicle owners across the country, from beginning of September 2018 onwards. Until now, the third party motor insurance was available on the basis of one year tenure; however, there was optional three-year two wheeler insurance available. But from now on, all the new vehicle owners will have to make sure that they buy tong-term two wheeler insurance. For bike owners it will be five-year third party cover and for four wheeler owners it will be three-year third party cover.
The insurance regulator (IRDAI) has already circulated this compulsory long-term insurance to the vehicle sellers. The reason behind the enforcement of such law is to provide compensation to the accident victims. Since most of the vehicle owners don’t consider third party liability insurance renewal after a certain period, and therefore the road accident victims are left without any compensation. It has also been said that the long-term motor vehicle insurance could be proven effective in bringing down the numbers of road accidents. However, this may not work that way. The long-term motor insurance may be regarded as an initial step towards minimizing road accidents or providing compensation to the on-road accident victims suffering death or injury.
The policyholder or the insurer cannot cancel third-party cover during the term, except in case of double insurance, or in the event where the vehicle is not in use anymore or in case the vehicle is transferred or sold. In addition to that, the No Claim Bonus (NCB) would be applicable to the own damage section only after the policy term has been completed. The Insurance Regulatory and Development Authority of India (IRDAI) will separately stipulate the commission payable for long-term cover and the payment of commission in a year will be only on the gross written premium recognized for the year.