Insurance Premiums to Cost a Policyholder under New GST Proposal

With the new GST rolling in from the Centre, there are going to be a number of changes where products and services will either cost more or lesser than what it’s priced at now. For the middle class family, an immediate impact which can be observed with the new GST is that insurance premiums will have a policyholder shell out more money due to the increase in the tax rate that has been imposed on insurance. For families who own a car and who pay for term and health insurance, the annual increase would come up to a total of Rs.1,000 a year on average. The impact that GST will have will show an increase from 15% to 18% in the tax that’s paid.

Non-life insurance companies have been looking to gain the advantage of tax credit. According to the service tax regime, insurance companies have been in the list of businesses which are exempt from benefits that come under the input tax credit. Life insurance companies have said that the input tax credit will vary from one company to another depending on the maturity level of the company.

Any regulations or revisions in taxes will have to acquire approval from the insurance regulator. It is known fact that most families end up paying Rs.20,000-Rs.25,000 to come under the umbrella of benefits of a health insurance cover. This amount is set to increase by around 3% and a similar situation will be seen in the premiums paid for auto insurance. Banking will also see marginal increase in the charges which have to be paid by a customer. But, as most earnings are sought by interest spreads, the main impact of the revision will be limited to the loan processing fees, card fees, penalties, and remittance categories.

Life insurance is taxed differently when compared to term insurance as the latter is categorised as a risk premium while the former come with a health component and is taxed differently.

Partner and Leader-Insurance of PwC India, Joydeep K. Roy, stated that ULIP and Endowment products come with a large component of consumer savings apart from risk premium. The service tax, without cess, was levied at 14.5% on various pure risk products, 3.5% on the first year followed by subsequent 1.75% on other endowment plans.

Roy also stated that the GST was meant to be implemented sensitively on various categories of products. Micro insurance or any other certain insurance products which fall below a threshold needs to be exempt from changes due to the GST.

9 Ways to Reduce Your Motor Insurance Premium

As important it is to choose the best of the deals on the car loan that you settle for, it is equally or maybe more important for you to choose and select the best or ideal car insurance for your vehicle. This is due to the fact that the motor insurance you take can help you in staying away from legal woes in the long run.

Thus, here are some of the ways to reduce your motor insurance premium.

1.    Cater the right information

Whenever you are presenting the right amount of information to the insurer, you are in turn decreasing the premiums by 10 to 30 percent.

2.    The gender and the profession of the driver

Even though still a farfetched idea in terms of the norms in India, many western countries consider the premium amounts based on the profession as well as on the gender of the driver. Usually in there in case the driver is a female, she is entitled to more discounts. Factors such as whether the person works at an office or is a salesperson and has to travel across cities are also taken into consideration here.

3.    Manufacturer and car model

Discounts are also applicable in motor insurance premium rates depending on the manufacturer and the model of the car. If the car model or the company has a past record of being accident prone, chances are that you would get higher discounts when compared to others with better history.

4.    Place where the car will be used

It is extremely important to inform where the car will be driven the most along with the fact that the place of registration and pile will also be considered. The claims are calculated depending on the locale by the insurance companies and it is seen that the scratch and dent claims are more in congested cities than in the rest.

5.    Pay heed to the safety features

This might sound interesting but inform your insurance company of the safety features your car and get the features like anti-theft as this would be an easy path to getting 2 to 5% discount without doubt.

6.    The facts of no-claim bonus

The no-claims bonus is nothing but the percentage which is allowed as discount on the damage premium. If the facilities are not availed, the percentage can increase with each passing year (even to up-to 50%) and you can choose whether you want to transfer this to another vehicle or no.

7.    Stay-in concessions

In case your vehicle is in the garage without use for more than 2 months, you are eligible to avail concessions after that you inform the insurance company. These concessions can be easily availed when you go about renewing the insurance policy or extending the expiry or credit period.

8.    The voluntary deductible perks

The premium discounts can go up-to more than 35% while the voluntary deductibles are applied. If the insured chooses to opt out of the minor damage claims, he or she gets eligible for higher discounts.

9.    Become an automobile association member

If you are a part of the Automobile Association, you are eligible to get discounts on damage premiums for both your private car and two wheeler policies. Due to the ever changing policies and the range of discounts, it is always better to stay updated with your insurance company to know how much you are eligible for at a given point of time.

Top Reasons to Cancel Your Car Insurance

Car insurance is absolutely required to drive your car legally on the road. There are only certain instances where people need to cancel their car insurance policy. Cancelling your car policy comes with a few conditions. Let’s take a look at the top reasons why people cancel their car insurance policies:

•   Unhappy with the insurer
•   Free Look Period
•   Theft of car
•   Sale of car
•   Car has crossed the age limit
•   Traveling out of the country

Unhappy with the insurer

If you are unhappy with your current insurer, you have the option to switch over to another insurer you may feel is better. You can also cancel your policy and buy a new one from a different insurance provider. The choice is yours. If you have not made a claim, it would be more advisable to switch your policy to another provider because your no-claim bonus is portable. You will be able to retain the benefits of having an existing policy.

Free Look Period

Every insurance policy offers a free look period of generally 15 days or 30 days. Within this period, you can view your policy and review the details. If you are unhappy with it, you can return the policy and get a refund of your premium. The time stipulated begins from the time you receive the policy document. The insurance company will, however, deduct any stamp duties and other charges before refunding the money.

Theft of Car

If your car has been stolen, then you will have no choice but to cancel your policy on the car. If you have paid premiums recently, then you can claim for a refund. This is applicable to third party liability policies. If you have a comprehensive plan, then the policy will cover the loss incurred and pay you the insured’s declared value. Once the claim is paid out, then the policy will automatically terminate.

Sale of Car

At the time of selling the car, you have the choice to either transfer the existing insurance policy to the buyer. You can also cancel your policy and let the buyer take out a new policy. If you opt to cancel your policy, you might be eligible for refunds if the policy is valid.

Car has crossed the age limit

If your car has become too old, some insurance companies will refuse to provide an insurance policy. If the car’s condition has also deteriorated, then insurers will be reluctant to protect it. In this case, you might have to cancel your policy.

Traveling out of the country

In the event that you have to relocate on a long term basis abroad, if you are not going to be using your car for a while, you may not want to pay the premiums to protect it. But remember, you will not be protected in case of theft and other damages that might be cause even if your car is parked.

To cancel your car policy, you will most likely need to submit a request in writing via email or mail. The insurance company will provide you with all the information about the process and documents required. You can then submit your request, your documents and sign the declaration which will authorize the insurer to cancel your plan.

Once cancelled, you should also receive a confirmation letter about the same. This letter will also contain information about the premium paid, the charges deducted and the refund amount.

What you need to know about car insurance inclusions and exclusions

Many people pick up a third party liability car insurance policy and forget about the rest of their insurance. If you own a car in India, it’s mandatory to take out a third party plan if you want to drive the car on the road. But just getting one of these policies doesn’t mean you’re sorted. You should know the benefits of taking out a comprehensive policy. And more importantly, you should know what your insurance plan will cover and what it will not.

Top reasons for insurance claim rejections

• Accidents caused due to breaking the law
• Regular wear and tear of the vehicle
• Gross negligence on the part of the vehicle owner/driver
• Driver has no valid licence
• The damaged vehicle was moved without authorisation from the insurance company causing further damage to the car

Third party Policies

Inclusions

If you’ve opted to take out only a third party liability policy, then your plan will cover the following:

• Damages to any person caused by an accident involving your car. If you are liable to pay compensation for injuries to anyone, the insurance policy will cover it.
• Damages to a person’s property or vehicle. If you are liable to pay someone for damages you’ve caused to their property, then the insurance plan will pay for it.

Exclusions

• The following are the exclusions of these plans:
  If you incur any injuries to yourself, the insurance plan will not cover this. You will have to pay for medical costs on your own.
• If your own vehicle is damaged or stolen, the insurance company will not be liable to pay any compensation.

Comprehensive Policies

Inclusions

• Damages and injuries caused to a third party will be covered.
• Damages to a third party’s vehicle or property will also be covered.
• Any damages incurred on your own vehicle will be covered.
• Any injuries to self sustained in the accident will also be compensated.
• In the event of any natural calamities such as earthquakes, floods and landslides, your insurance policy will provide financial aid.
• If your vehicle is stolen, the insurer will pay out an amount equal to the insured declared value (IDV) as per the details of your policy.
• In case of any other man-made disasters such as terrorism, strikes and fire, the insurance plan will cover your losses.

Exclusions

• Expired/Lapsed policies will not be eligible to make claims.
• In case of war, rebellion, hostilities, terror attacks or invasion, the insurance policy will not be valid.
• Insurance plans will also not cover nuclear risks.
• If you are involved in an accident while under the influence of alcohol or drugs, the insurance plan will not pay out.
• Consequential damage such as driving with a failed gearbox or engine oil leakage causing further damage.
• Any staged accidents amounting to fraud.
• Driving without a valid licence or if the driver is under age.
• Driving on the wrong side of the road.
• Using a car for any other purpose than intended in the policy, such as commercial car for private purposes and vice versa.

In some cases, insurance companies offer add-on covers or riders that will provide protection against some of the exclusions. Opting for these riders will cost you an additional premium but will also provide extra coverage such as covering injuries to the co-passenger of the vehicle.

Why Insurance Is Important In The Sale And Purchase of Pre-Owned Vehicles

In the recent few years, the sale of second hand vehicles has definitely seen a rise. More and more people, especially new drivers, are now opting to purchase a second hand car instead of a new one. Because of the saving they can make in the costs difference between an old and a new car. With several leading car manufacturers already retailing in pre-owned cars, the market of second hand cars is only going to rise in the coming years.

When it comes to any vehicle, be it new or pre-owned, insurance is a compulsory requirement as per the rues of the Motor Vehicles Act. Speaking of second hand cars, motor insurance plays a very crucial role in the sale and purchase of these pre-owned vehicles. The aspects of a motor insurance policy, whether it is for a new car or a used car, will remain more or less unchanged. If you are planning on purchasing or selling a pre-owned car, it is imperative that you familiarize yourself with the insurance policy that the vehicle is covered under, the terms and conditions governing the policy, the details involved in the transfer of the policy when required and also the retention of discounts available as per the No-claim Bonus. Considering all these aspects are extremely important in transactions where a pre-owned vehicle is being purchased or sold, not only the buyer but also the seller of such vehicles must pay attention.

 For Sellers

When dealing with pre-owned cars, the very first thing which a seller must not forget checking is whether the insurance policy of the vehicle has been transferred from the name of the car’s previous owner to that of the new buyer. No sooner than the insurance policy is transferred from the ex-owner to the new vehicle owner, the seller must claim the vehicle’s No Claim Bonus certificate (in case there is one) from the issuing insurance provide. No-claim Bonus, also called as NCB, is the bonus which policyholders are provided with for every claim-free year. As per a No Claim Bonus, each year which passes without the policyholder making a claim on their motor insurance policy, the insurance provider will give a certain percentage of discount on the insurance premium amount.  The percentage of this NCB discount goes up with every successive claim free year. The starting discount is usually 20%, which keeps on increasing with each year and is capped at a maximum of 50%. This means that policyholders can get up to 50% discount on their policy premiums at some stage, which adds up to a lot of cash saving.


The No Claim Bonus is also a time-bound benefit which is limited to a period of 3 years.  This means that the seller can only transfer this bonus to the new policy that has been purchased, within a period of 3 years, following which the NCB will no longer be valid.  Also to keep in mind, the No Claim Bonus can only be transferred if the buyer is switching from an old insurance provider to a new one. In case the insurance provider is unchanged, transfer of the NO Claim Bonus will not be allowed.


For Buyers


When it comes to the purchase of a pre-owned vehicle, there are several things which buyers must keep in mind. The very first thing to remember is that, following the purchase of a used vehicle, the buyer must transfer of the ownership of the insurance policy in their name within a period of 2 weeks, counting from the day on which the vehicle has been purchased. This is important because, in case the transfer hasn’t been done within the stipulated period of time, the insurance company can reject a claim that may be made in the future. This rule is in accordance with other similar regulations laid down by IRDA (Insurance Regulatory & Development Authority) regarding insurance of used vehicles. As per the rules, insurance providers will not settle any insurance claims where there is a disparity in the name and address details of the vehicle’s insurance or registration certificate.


If you are planning on purchasing a pre-owned vehicle in the future, here is some information regarding motor insurance which can come in handy.

Transferring An Insurance Policy To A New Insurer

In case of the purchase of a second-hand vehicle where the insurance ownership needs to be transferred, the seller of the vehicle must intimate the insurance company about the same. This intimation about the transfer must be done by the seller in writing, in addition to the payment of a nominal fee amount and the  pro-rata recovery of the No Claim Bonus, for the period starting from the date the policy has been transferred to the date it stands to expire.


What Constitutes a Motor Insurance Policy

A motor insurance policy will consist of the following:

• A bundled or comprehensive policy which that includes Third Party Cover (compulsory) or Own Damage Cover.
• In case of a Third Party insurance or a Liability Only policy, the policy will not provide cover for the damage that has been caused to the insured vehicle. However, in case of an Own Damage (OD) policy, cover will be provided for the costs of repairing the damage caused to the vehicle or even to the extent of replacing the vehicle.

How Will The Sum Assured Be Calculated

In case of a motor insurance policy, the calculation of the um assured is done taking into account the actual cost of the vehicle along with its IDV (Insured Declared Value). The IDV of the vehicle is determined by taking into account the current value of the vehicle, along with the value of depreciation that is applicable, following the age and usage of the vehicle.

Before You Select a New Insurer

Choosing the right insurer for your vehicle is a very important decision which must not be taken lightly. Given that you will be required to make regular payments towards the policy you choose, ensure that you choose the one that’s not only adequate for your requirement but also one that fits in your budget. There are certain traits which set aside a good insurer from the scores of insurance providers offering policies. The first and foremost is the network of cashless service stations and garage workshops. Choose an insurer which has a wide-spread network located across the country. the other important feature of a good insurer is indicated by their claim settlement record and process, both of which are invaluable qualities for times when a claim requires to be settled.

Factors Affecting Motor Insurance Premiums

Premium charged on an insurance policy will be different for different companies. Some of the primary factors which determine the cost of insurance premiums are the discounts being offered, cost of personal accident cover and difference in the IDV estimation methodology, among others. As a buyer, it is your responsibility to ensure that the car related details, such as the car model type, fuel type, seating capacity, etc., mentioned in the insurance certificate must be the same as those given In the vehicle’s registration certificate and clearance certificate.

Policy Renewal

At the time of policy renewal, the premium for the current year will be lower than the premium charged for the previous year, if no claim has been made on the policy in the past year. If the policyholder has earned a No Claim Bonus, the same will be applied as discount on the current year’s premium.