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IRDAI Rules for Car Insurance Policies: Explore Guidelines

Team AckoSep 16, 2021

Insurance Regulatory and Development Authority of India (IRDAI) regulates the Indian insurance industry to ensure fair practices and transparent transactions. This requires following certain pre-defined rules and regulations for both the insurance company and the policyholder. Failing to do so will result in fines and penalties. Let us deep dive into what the IRDAI rules for car insurance are.

IRDAI rules for car insurance policies

What is meant by IRDAI car insurance rules?

IRDAI has defined certain rules which the insurance companies and policyholders are obliged to follow. These rules ensure faster settlement of genuine claims, prevention of car insurance fraud, elimination of malpractices, and helpful grievance redressal.

What are the guidelines for Third-party Car Insurance Cover?

A Third-party Liability Car Insurance Policy covers the car owner from third-party losses. Buying at least this type of car insurance plan is mandatory by law in India. Here are the basic rules related to Third-party Liability Car Insurance. 

  • The insurance company must compensate the third party for losses related to life or property caused due to the insured car.

  • In the unfortunate event of the death of the third party, the insurer must calculate the amount of compensation with respect to the net worth of the deceased individual. The final decision lies with the Motor Accidents Claims Tribunal.

  • In case of third-party property damage, the amount of compensation will be as per the extent of damage caused by the insured car. This can be up to Rs. 7.5 lakhs.

  • Any legal liabilities arising from an accident with a third party must be paid by the insurance company.

If the paid driver of the insured vehicle suffers death or disability, the insurance company is liable to pay the sum insured as per the terms of the Personal Accident Cover Policy.

What are the guidelines for Comprehensive Car Insurance Cover?

Buying the Comprehensive Car Insurance Policy is not mandatory by law. However, insurance experts advise opting for this plan as it offers holistic coverage. Take a look at the following list to understand IRDAI guidelines for car insurance.

  • The insurance company must provide all coverage offered under the Third-party Liability Insurance Plan.

  • The insurer must provide theft coverage if the claim is approved.

  • The insurance company is liable to cover the cost of repairing the damaged vehicle in case of an approved accident claim.

  • Coverage for natural or man-made calamities, damage from fire or explosion, etc., must be offered under a Comprehensive Policy as per the terms of the insurance plan.

The insurance company is liable to pay the sum insured as per the terms of the Personal Accident Policy if the paid driver of the insured vehicle suffers death or disability.

General exclusions of a car insurance policy 

Every car insurance policy has some exclusions mentioned in the policy document. These are situations in which the policyholder cannot raise a claim against their car insurance policy.

  • Any mechanical or electrical failure is not covered

  • Regular wear and tear 

  • Intentional damage

  • Damage from driving under the influence of an intoxicating substance

  • Damage when the policy was not active

  • Illegal racing or criminal activity

  • Damage to the car while driving outside the geographic area

  • Damage from not following the traffic rules

Note: Please read through your car insurance policy to know the detailed list of exclusions.

Customer turnaround time by IRDAI

The IRDAI has defined certain timelines to which the insurance company and policyholder must adhere for fair and timely transactions. These can be related to claims, grievance redressal, or other services. Take a look at the following table to know more.

Condition Turnaround time
The time taken to issue or cancel a policy 15 days
Getting a copy of the proposal 30 days
Appointing a surveyor Within 72 hours of intimation of loss
Conducting a survey 48 hours from the appointment
Submission of the survey report 15 days
Request to conduct another survey 15 days from the date of receiving the receipt for the previous survey
Addendum report 15 days
Communication for submitting additional documents 7 days
Settlement/rejection of claim from receiving the survey report 30 days
Grievance acknowledgement 3 days
Grievance resolution 15 days

Source: policyholder.gov.in

IRDAI new rules for car insurance

The IRDAI frequently updates their guidelines related to motor insurance to keep them relevant to the current situations. Here is a list of recent changes in IRDAI rules.

  • It was mandatory for new cars to have a long term car insurance policy. They were to buy a policy with a minimum policy period of three years. However, as per the new changes, it is not mandatory to buy a full long term car insurance policy. 

The car owner has an option to buy an annual standalone Own Damage policy along with a 3-year Third-party Liability policy.

  • The No Claim Bonus must have a standard grid for easier understanding. Previously, an insurer could decide the amount of bonus to be granted for policyholders for a long term policy. However, now the grid is the same for all insurance companies.

  • The Registration Certificate (RC) will stand cancelled in case of total loss or theft claims. Here the policyholders must send the RC to their insurance company.

  • Compulsory deductibles will now be called “Standard Deductibles”.

  • Standard deductibles are fixed at Rs. 1000 for cars with 1500cc or less and Rs. 2000 for cars with 1500cc or more engine displacement capacity.

  • IRDAI has recommended that all passengers travelling in the insured vehicle must have an insurance cover of Rs. 25,000.

IRDAI rules for car insurance renewal

IRDAI has set some rules about renewing car insurance policies for car owners. The policy must be renewed in time to avail continuous coverage. In case of gaps, the insurance company is not liable to pay the cost of damage that occurred when the policy was not in force. If the car owner fails to renew the car insurance policy within 90 days post the expiry date, then any applicable No Claim Bonus will drop to zero. 

IRDAI rules for total loss

A car is considered to be a total loss when the repair cost is very high. This kind of damage can happen from a major accident or a natural calamity. Total loss calculation is directly related to the Insured Declared Value of a car which a car owner declares while buying the policy. If the repair costs exceed 75% of the IDV, then the insurer will declare a total loss as per IRDAI.

Also, read: 9 things you probably may not know about car insurance

Depreciation & IDV rules as per IRDAI

Depreciation refers to the decrease in the monetary value of a car. It increases with the time and age of a car and is important for calculating the claim amount. While depreciation is the decrease in the value of a car, IDV (Insured Declared Value) is the approx. the market value of the car. The following is the IRDAI depreciation table.

Car’s Age Depreciation on car’s value
Up to 6 months 5%
6 months -1 year 15%
1 year - 2 years 20%
2 years - 3 years 30%
3 years - 4 years 40%
4 years - 5 years 50%

Frequently Asked Questions

The following questions are related to car insurance and IRDAI rules. Feel free to contact ACKO by sending an email at [email protected] in case of more queries.

FAQs

Can I buy a car insurance policy directly from the insurance company instead of the dealer?

Yes, buying car insurance directly from the insurance company is more fruitful than buying the policy from a dealer.

For example, buying car insurance from ACKO helps you get cheaper policies, faster claim settlement, free services like pick-up and drop, 3-day repairs, etc. as per the terms and conditions of the policy.

Buying which type of car insurance policy is mandatory by law in India?

Buying at least the Third-party Liability policy is mandatory by law in India.

What happens if a paid driver suffers death while driving a car?

The insurance company must settle the claim and pay the sum insured as per the terms and conditions of the Personal Accident Policy in case of the death of a paid driver.

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CIN: U66000KA2016PLC138288

IRDAI Registration No: 157

Category: Non-Life Insurance

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