long term insurance policy

How to Save Money by Opting Long Term Insurance Policy?

Long term insurance policy is a sure shot solution for long term financial security. Just one-time investment and you are free for a long period. There are people who buy cheaper insurance policies that have less coverage and regret in future because of the wrong decision. Long term insurance policies are meant to give long term protection from any hazard or mishappenings coming your way without notifying. Most of the people who own a car or two-wheeler don’t really feel like buying insurance policy at all. Thanks to the mandatory clause of having third party liability with every vehicle owner. The concept of long term insurance policy has introduced to combat non-renewal issues. The insurance regulatory and development authority of India (IRDAI) allowed long term insurance policy for two-wheeler and car with tenure up to three to five years.

Remembering to renew the insurance policy every year is quite difficult. Here long term insurance policy gives little relaxation in this. Renewal turns hassle-free. Driving a vehicle without third party liability in India is illegal; going behind the wheel with a lapsed insurance policy is also a policy breach. Opting for long term insurance policy can save you from all these uncertainties. India records the maximum percentage of uninsured two-wheeler. For some progress and development in India revision or amendment is important to some extent. Changes are made for betterment. A new change that we all have seen is making long term insurance policy mandatory for every new vehicle owner implemented from 1st September 2018. So far third party liability insurance was available for one year of tenure. After this amendment, it is three years for private cars and five years for two-wheelers.

Benefits of buying a long term insurance policy –

benefits of long period insurance term

Increase in duration: The mandatory increase in tenure makes people relaxed from frequent renewal process every time. This is one of the best advantages an insured can enjoy after buying long term insurance policy. As per the IRDAI mandatory circulation, the two-wheeler owners need to have third party cover for five years whereas three-year third party covers for private car owners. The main reason is to provide continuous financial safety in case of any mishaps without policy lapsing. Earlier many vehicle owners don’t consider renewal of third party cover after a certain period. To save them from this habit, long term insurance has introduced.

Benefits offered: If you buy long term insurance policy for your vehicle you may be offered several discounts as per the company’s terms and conditions. Through long term plans insured can save a lot by getting various discounts and incentives. This is why buying a long term insurance policy is always a wise decision. Who doesn’t want to save money while buying an insurance policy? You can be the one, think of it.

Hassle-free Renewal:Hassle-free renewal is the first thing people like in long term insurance services. They don’t have to run every time for renewal. This is something that policyholders want to get rid of. Many customers show reluctance at the time of policy renewal as it demands little time. Some visit branch whereas some prefers doing it online. Still, there exist changes for renewal failure. The long term motor insurance gives no room for excuses or chances for not renewing your vehicle. Instead, you don’t need to rush before policy tenure finishes. 

No claim bonus: No claim bonus is a reward designed to give to those policyholders who don’t make a single claim during the insurance period. The NCB percentage is divided in different slabs according to the insurer. The policyholders can get maximum NCB up to 50% starts with 20% itself. The bifurcation is 20% for 1 claim free year, 25% for consecutive 2 claim-free years, 35% is for consecutive 3 claim-free years, 45% is for consecutive 4 claim-free years and 50% is for consecutive 5 claim-free years. No claim bonus.

No Claim Bonus (NCB) wherever applicable will be as per the following table, which will be applicable for renewal of annual as well as long term policy. Also same will be applicable for migrating from annual to long term as well as long term to annual policy.

 

All types of vehicle 

% of discount on own damage premium
No claim made or pending

during the preceding full

Year insurance.

20%
No claim made or pending  during the preceding 2

consecutive years of

insurance

25%
No claim made or pending

during the preceding 3

consecutive years of

insurance

35%
No claim made or pending

during the preceding 4

consecutive years of

insurance

 

45%
No claim made or pending

during the preceding 5

consecutive years of

insurance

50%

(Source: SGI policy wording)

Personal accident cover: In long term insurance services, the personal accident cover for owner-driver is given accordingly. As per the terms and conditions of the policy, the company undertakes to pay compensation for bodily injury/death, caused by violent accidental and visible external means.

PA policy

See the following table –

Nature of injury scale of compensation
Death 100%
Loss of two limbs or sight of two eyes or one limb and sight of one eye 100%
Loss of one limb or sight of one eye 50%
Permanent total disablement from injuries other than named above. 100%

(Source: SGI policy wording)

Exception:

No compensation shall be payable in respect of death or bodily injury directly or indirectly wholly or in part arising or resulting from or traceable to

(a) Intentional self-injury, suicide or attempted suicide physical defect or infirmity.

(b) An accident happens if a person is under the influence of intoxicating liquor or drugs.

This cover is subject to –

The registered owner-driver of the insured vehicle

The owner-driver is the insured named in the policy

The owner-driver holds an effective driving license

The sum insured (IDV) The Insured’s Declared Value (IDV) of the vehicle is considered as the sum insured for the purpose of this policy which is fixed at the commencement of each policy period for the insured vehicle. The IDV of the vehicle (and side car/accessories, if any, fitted to the vehicle) is fixed on the basis of the manufacture’s listed selling price of the brand and model as the insured vehicle at the commencement of insurance/renewal and adjusted for depreciation (as per schedule below). The schedule of age-wise depreciation as shown below

 

The schedule of depreciation for fixing IDV of the vehicle

Age of The Vehicle % Of Depreciation For Fixing IDV
Not exceeding 6 months 5%
Exceeding 6 months but not exceeding 1 year 15%
Exceeding 1 year but not exceeding 2 years 20%
Exceeding 2 years but not exceeding 3 years 30%
Exceeding 3 years but not exceeding 4 years 40%
Exceeding 4 years but not exceeding 5 years 50%

(Source: SGI policy wording)

Final Words, if there is so much of a benefit given under long term insurance policy why would anyone leave this chance? These are the ways you can save money while buying a long term insurance policy. If you want to give your family peaceful ride don’t hesitate to buy long term insurance policy for your two wheeler or private car. Soon the approach of long term motor insurance policies and services will change the dynamism of the insurance industry. The idea behind the introduction will implement completely with insured’s understanding of the need of it.