How the New Scrappage Policy Can Help In Driving Down Insurance Premium for Older Cars

From increased scrutiny to lower premiums on old cars, here’s why you need to up your insurance game

Image Source- Bajaj Allianz General Insurance

‘Out with the old, in with the new’ seems to be the new motto of the Indian government, which recently introduced the ‘Vehicle Scrappage Policy’. As the name suggests, any commercial vehicle older than 10 years and private vehicle older than 15 years will not be deemed roadworthy anymore, unless they pass a comprehensive automated fitness test^[1]. And if they fail the test, they should be off the roads in the interest of better pollution control and safety, which new vehicles are better at. The vehicle will then be mandatorily de-registered and the vehicle owner can get it scrapped. The mandatory testing of personal vehicles will start from June 2024. 

Why are they doing this?

Studies have suggested that older vehicles tend to cause 10-12 per cent more pollution than modern-day cars. Not to mention, older vehicles are not only more hazardous but also carry a greater risk of breakdowns and accidents. With over 70 lakh of them prowling our streets, the new policy could be beneficial to everyone^[2]. 

What does this mean for you?

If you have inherited the old family car, with its better days behind it, you may need to take it to one of the registered automated vehicle inspection centres. It will then be put under a series of tests scrutinising its engine performance, the effectiveness of its brakes, etc. If your car fails the test twice, well, be prepared to say your goodbyes. 

What can you do?

First, get your car insured now! It is illegal in India to drive your car without any insurance, and for a good reason. Driving here comes with its own perils. A well-hidden pothole or even a simple crack to the windshield would send you dipping into your savings. Not to mention, the number of anxiety-inducing incidents we see everyday caused by undisciplined commuters. 

What type of insurance should you get?

There are two types of car insurance policies in India - Third party Insurance and Comprehensive Insurance. Third-party insurance is mandated by law. But it only saves you from any legal liabilities. Under third-party insurance, you do not get compensation for the damages to your car. 

A comprehensive car insurance policy, on the other hand, covers both third-party liability and damages to your car, including total loss situations like an accident or a theft. * Standard T&C Apply

Where can you buy it?

You can buy car insurance online, right from the comfort of your home. Not to mention, you can pay premiums and renew your policy in minutes without the involvement of any broker. 

How much will it cost you?

Thanks to the vehicle scrappage policy, insurance premiums might actually go down. Currently, old vehicles contribute little to the insurance pool and carry only third-party insurance. It is no surprise then that third-party claims carry an incurred claims ratio in excess of 140 percent, pushing the premiums higher^[3]. 

Taking older vehicles off the road will not only reduce these claims, but also the stress on car insurance prices. 

What about the insurance on your older vehicle?

In case you have no other choice than to scrap your vehicle, you may want to call your insurer. With a proper heads-up, the insurance premiums can either be stopped or transferred to one of your other vehicles. Please visit the official website of IRDAI for further details.

Who can give me the best deal?

The folks at Bajaj Allianz General Insurance offer best-in-class third party car insurance and comprehensive insurance packages. The wider coverage with a comprehensive policy will not only serve your needs but will also give you many extra perks in the form of add-on riders. Some of these include engine protection (often not covered in traditional policies), personal baggage insurance (in case of theft) and a 24/7 spot assistance service, to make sure you’re never stranded in case of a breakdown. * Standard T&C Apply

To know more, head over to the Bajaj Allianz General Insurance website to get the best possible deal. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

Source:

[1] https://indianexpress.com/article/explained/vehicle-scrapping-policy-indian-economy-environment-7452803/

[2] https://www.indiatoday.in/auto/story/vehicles-scrappage-policy-launched-all-rules-and-benefits-explained-in-5-points-1840491-2021-08-13

[3] https://www.livemint.com/money/personal-finance/scrappage-policy-may-lower-your-car-insurance-premium-11618247644113.html