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Third-party motor insurance premiums face a steep jump

Raising the premium payable, on the 'Third Party' cover under Motor Insurance, has become an annual ritual.

As I had explained in my blog post 'Ten key aspects of vehicle insurance that you must know', a typical policy to insure your vehicle has two aspects.

One, of course, is the damage to your vehicle. Nowadays, the insurance companies have the freedom to fix the premium for the same. You may, however, be surprised to know that this "own-damage cover" is optional.

The second aspect of your vehicle insurance covers injury/death of a third person and/or damage to his/her property... caused by your vehicle. The premium for this is decided by the Insurance Regulatory Development Authority of India (IRDA). Having "third-party cover" is mandatory.

IRDA takes into account various factors to arrive at a suitable third-party insurance premium for different types of vehicles. These include among others average claim amounts, frequency of claims, expenses involved in servicing the policy and cost inflation index.

Accordingly, IRDA has announced that with effect from April 1, 2015, the following premium rates will apply for the third-party insurance cover.

Pvt. cars (not exceeding 1000 cc capacity) : Up from Rs.1129 to Rs.1468
Pvt. cars (from 1000 to 1500 cc) : Up from Rs.1332 to Rs.1598
Pvt. cars (more than 1500 cc) : Up from Rs.4109 to Rs.4931

2-wheelers (not exceeding 75 cc) : Up from Rs.455 to Rs.519
2-wheelers (from 75 to 150 cc) : Up from Rs.464 to Rs.538
2-wheelers (from 150 to 350 cc) : Up from Rs.462 to Rs.554
2-wheelers (more than 350 cc) : Remain same at Rs.884

This works out to an increase of 30% for small cars and 20% for medium to large cars. Last year, the increase in premium rates was 20% across all types of cars.

And for 2-wheelers the increase works out to 14% to 20% (except Nil increase in case of 350+ cc bikes). Last year, the increase in premium rates for all 2-wheelers was 10%.

The rationale behind such steep increase in the Third Party premium rates year after year, is the huge losses that the insurance companies suffer on account of third party claims.

While we are constrained to accept the premium rates on third-party cover as mandated by IRDA, we have considerable scope to minimize the premium payout on the own-damage cover. Here's my list of '10 Ways to Save Money on your Car Insurance Premium'.

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