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How the New Bumper to Bumper Vehicle Insurance Rule Will Impact Consumers

If you are a car owner, you need a mandatory third-party motor insurance policy to take your car out on the road in India. You can choose an own-damage policy and add-on covers along with a third-party policy. Alternatively, you can choose a comprehensive package policy that has both third-party and own-damage coverage. In addition, you can select one or more add-on covers to enhance coverage as per your needs. One such plan is the new bumper to bumper vehicle insurance. Read on to learn about it in detail.

In August 2021, the Madras High Court made it mandatory for all new vehicles to have a bumper to bumper insurance starting 1st September 2021. This is over and above the compulsory personal accident insurance valid for five years. Similar to zero-depreciation cover, bumper to bumper car insurance is an add-on policy that must be bought along with a comprehensive policy. If you own a brand-new or a premium category car or have started driving recently, this add-on can prove beneficial. Also, you may consider this add-on if you frequently drive on accident-prone roads.

 

Effect of bumper to bumper car insurance on consumers

Previously, most two-wheeler policyholders used to do away with OD policies as it was not compulsory. However, this HC ruling will change things for both motor policy buyers and the insurance sector in Tamil Nadu. Let us look at the effects of this ruling on the insurance market.

 

  • Since bumper to bumper insurance has been made compulsory, it will come attached with the OD or comprehensive policies. Therefore, the number of OD policy purchases will go up.
  • Industry experts and automakers anticipate an increase in the on-road price of both cars and two-wheelers as many dealers may start selling them along with the compulsory bumper to bumper insurance.
  • Car and two-wheeler owners may have to pay a higher premium towards OD premiums while purchasing vehicle insurance.
  • The ruling may dissuade potential buyers from getting a new vehicle as it affects the initial cost of the policy and the subsequent premiums at the time of policy renewal.

 

Bumper to bumper car insurance or full-body insurance provides full coverage for all rubber, fibre and metal parts of your car. However, it does not cover engine damage resulting from oil leakage or water ingression without considering depreciation.

Any car older than five years is not eligible to be covered by this car insurance add-on. You can purchase a bumper to bumper car insurance add-on along with a standalone own-damage car insurance policy or a comprehensive car insurance policy. You cannot buy this policy on a standalone basis or with third-party car insurance.

 

Should you buy bumper to bumper insurance?

The bumper to bumper car insurance covers depreciation and helps you receive the entire amount of sum insured (SI) in the face of a mishap as per the terms and conditions of the policy. A comprehensive policy provides extensive coverage for both accidental and non-accidental damages. However, your insurer will deduct a certain depreciation amount from the total claim amount while settling the claim. Depreciation or reduction in the vehicle’s value sets in from the moment you take the car out of the showroom; it starts at around 5% of the total ex-showroom price. Also, it increases every year at a certain rate. Almost all insurers consider deduction due to depreciation.

The bumper to bumper car insurance policy covers all kinds of damages to the car’s body, including the parts made up of rubber, fibreglass, plastic, nylon, and metal. This would save you from paying anything out of your pocket towards the cost of repair or replacement of car parts. Remember, repairing and replacing car parts, especially for luxury cars, can be costly.

The policy exclusions vary between insurers as it covers the own-damage components. It is up to the insurer to decide which items they would cover or not. The general exclusions include:

  • Damages due to mechanical breakdowns.
  • Damage to accessories and consumables such as screws, nuts, bolts etc.
  • Damage to the car engine due to oil leakage or water ingestion. For this, you must get a separate engine protection add-on cover.
  • Damage to the battery, tyre, glass, bi-fuel kit, gas kits and bearing.

 

A bumper to bumper car or bike insurance policy covers the depreciation amount that is generally deducted during claim settlement by insurance companies. The Madras High Court ruling is already creating waves in the insurance market in Tamil Nadu and may have far-reaching effects across the country.