IRDAI Rules for Third-Party and Comprehensive Car Insurance Plans
The Insurance Regulatory and Development Authority of India (IRDAI) plays a crucial role in regulating car insurance policies across the country. Its rules are designed to safeguard both policyholders and insurers, ensuring fairness, transparency, and financial protection. Understanding these guidelines can help you make informed decisions when selecting car insurance coverage.
This guide covers the IRDAI regulations for third-party liability and comprehensive car insurance policies, along with recent updates and general rules you need to know.
1. IRDAI Guidelines for Third-Party Liability Insurance
Third-party insurance is mandatory for all vehicles in India and protects the insured against legal liabilities arising from damages or injuries caused to another person or their property. Here’s how IRDAI regulates third-party insurance:
a. Compensation for Death or Bodily Injury
- The insurer is obligated to compensate third parties for any injury or death caused by the insured vehicle. The Indian Motor Accidents Claims Tribunal determines the amount of compensation in case of disputes.
- In cases of death, the compensation is calculated based on the deceased individual’s net worth, ensuring the dependents receive adequate financial support.
b. Property Damage Coverage
- The IRDAI has capped the third-party property damage compensation at ₹7.5 lakhs. The amount of compensation is determined by the extent of the damage inflicted by the insured vehicle.
c. Legal Liabilities
- Insurers must pay for legal responsibilities arising from an accident involving the insured vehicle, including legal fees and court settlements.
2. IRDAI Guidelines for Comprehensive Insurance
Comprehensive car insurance provides a wider scope of protection, covering both third-party liabilities and damages to the insured vehicle. IRDAI’s regulations for comprehensive insurance include:
a. Third-Party Liability Coverage
- Comprehensive insurance must include all third-party liability coverage as mandated by law, ensuring that both third-party and own damage claims are handled.
b. Theft Protection
- If a claim for vehicle theft is approved, the insurer is required to compensate the insured for the market value of the vehicle (known as the Insured Declared Value or IDV).
c. Accident Damage Compensation
- Insurers must cover the cost of repairing damages caused by accidents. This includes repair costs for damages from both minor and major accidents, as long as the claims meet the terms of the policy.
d. Coverage for Natural and Man-Made Disasters
- Comprehensive policies must provide coverage for damages caused by natural disasters (floods, earthquakes) and man-made disasters (riots, vandalism). Additionally, incidents like fire, explosions, or acts of terrorism are covered.
3. IRDAI Timelines for Transactions and Procedures
IRDAI has established timelines for various procedures to ensure smooth and timely processing of insurance transactions:
- Policy Issuance or Cancellation: Must be completed within 15 days.
- Receiving Proposal Copy: Should be provided within 30 days.
- Surveyor Appointment: Within 72 hours of loss intimation.
- Survey Report Submission: Insurer must submit the survey report within 15 days.
- Claim Settlement or Rejection: To be processed within 30 days of receiving the survey report.
These defined timelines ensure efficiency in claim processing and policy management, enhancing the overall experience for policyholders.
4. Depreciation Rules Under IRDAI
The IRDAI has standardized the depreciation rates used by insurers to calculate the reduction in a vehicle’s value over time. This helps in determining claim amounts for repairs or replacements:
- Up to 6 months: 5% depreciation.
- 6–12 months: 15% depreciation.
- 1–2 years: 20% depreciation.
- 2–3 years: 30% depreciation.
- 3–4 years: 40% depreciation.
- 4–5 years: 50% depreciation.
This table is applied during claim settlements for repairs or replacements, ensuring fairness and consistency across the insurance industry.
5. Recent Changes in IRDAI Car Insurance Regulations
In recent years, IRDAI has introduced several updates to make car insurance more effective and user-friendly:
a. Mandatory 3-Year Third-Party Liability for New Cars
- All new cars must now come with a mandatory three-year third-party liability policy. This regulation simplifies the renewal process and ensures that vehicles remain insured for a longer period.
b. Uniform No Claim Bonus (NCB) Grid
- IRDAI has standardized the NCB grid, meaning that all insurers must now follow the same bonus structure. This makes it easier for policyholders to switch insurers without losing their NCB benefits.
c. Cancellation of RC in Case of Total Loss or Theft
- If a car is stolen or declared a total loss, the vehicle’s Registration Certificate (RC) must be cancelled and submitted to the insurer. This prevents any future misuse of the vehicle’s registration.
d. Standard Deductibles
- The term “compulsory deductible” has been changed to “standard deductible,” and the deductible amounts have been fixed at ₹1,000 for cars with an engine capacity of 1500cc or less, and ₹2,000 for cars with higher engine capacities.
e. Passenger Coverage Recommendations
- IRDAI recommends that all passengers in the insured vehicle have coverage of at least ₹25,000, promoting better financial protection for passengers involved in accidents.
Conclusion
The IRDAI’s regulations for third-party and comprehensive car insurance plans provide a framework to ensure transparency, protect the interests of policyholders, and streamline the claims process. These rules not only mandate essential coverage like third-party liability but also offer flexibility with comprehensive insurance, enabling you to safeguard your vehicle against a wide range of risks.
By staying informed about these regulations, you can make better decisions about your car insurance policy, ensuring that you remain compliant with the law and well-protected on the road.
