No policy can be issued or renewed for a period longer than one year. In fact, premium for a policy issued or renewed for a period shorter than one year is to be charged as per the short period scale of premium. It is not permissible to pay premium in instalments.

 

Even if you have insured your vehicle, an insurance cover is invalid when :

The person at the wheel does not hold a valid driver’s licence at the time of the accident.
The driver is under the influence of drugs or alcohol.
The vehicle is carrying persons or goods more than the capacity permitted by the R.T.O.
The damage is incurred in a war zone.

 

Every comprehensive motor policy is subject to the Bonus / Malus clause. What does all this mean to you ? A lot. ‘Bonus’ as the word suggests means a discount on the premium amount for not lodging a claim. Every claim free car earns a ‘No Claim Bonus’ (NCB) @ 20%, 35%, 50% and 65% for the second, third, fourth and fifth year respectively. This percentage-wise bonus is deducted from the own damage total premium amount. No Claim Bonus can be transferred if you sell your existing car and buy another one. A reservation certificate has to be obtained from the insurance company, after showing proof of sale. Malus means a penalty that is charged if you lodge a claim in the insurance period. So if a policy earns a 20% bonus (on account of no claim lodged in the previous year) and a claim is lodged in the current year, then at the time of renewal, the bonus will be brought down to NIL. In every consecutive year if a claim is lodged, the policy will attract a ‘Malus’ (penalty) ranging upwards from 10% in the second year to 50% in the fifth year.

 

If your existing policy expires, and you do not renew it in time, you could attract malus. If policy is renewed within 1 month, no malus is applicable. If policy is renewed within a year of expiry, a 10% malus is payable. If policy is renewed after a year of expiry, a 30% malus is payable. If policy is renewed within 10 years of expiry, a 50% malus is payable. In case your insurance policy is lost, then renewal could attract upto 50% malus.

 

Doesn’t seem real. Well, if your past claims record has been great, it definitely can be a reality. When selling your old car and purchasing a new one, you are allowed to transfer your good track record. In other words, you can transfer your NCB to your new vehicle. In all likelihood, when buying a new car, you will buy a newer make and model whose value would be far greater. For example, if you’re selling a vehicle whose premium outflow amounts to Rs.5000 and you enjoy an NCB @ 65%, you’re net premium outflow is Rs.1750 resulting in a saving of Rs.3250. Now, if you purchase a new vehicle, you can transfer your NCB to the new vehicle. What you transfer is the ‘bonus percentage’ and not the actual amount of the bonus. Therefore, if the premium outflow of the new vehicle is Rs.12,000, you will enjoy an NCB @ 65% of this new amount. Thus your net outflow would be Rs.4200 resulting in a savings of Rs.7800 !