IRDAI Allows Standalone Own Damage Motor Insurance Policy

The Insurance Regulatory and Development Authority of India (IRDAI) has allowed both old and new vehicle owners (car as well as bike) to get a standalone own damage (OD) insurance cover at the time of both policy purchase and policy renewal from September 1, 2019. Earlier, both old and new vehicle owners were required to purchase an own-damage motor insurance policy bundled with a third-party motor insurance policy. However, it is important to note that a third-party (TP) motor insurance policy still remains a mandatory requirement for all vehicle owners as per the Motor Vehicles Tariff, 2002.

With the introduction of the option for standalone own damage insurance policy, vehicle owners will now be able to enjoy greater flexibility while buying/renewing motor insurance policy in two ways - firstly they will be able to purchase an OD cover at a later date that a TP policy and secondly they will have a choice to purchase it from a different insurance company. Earlier a vehicle had no choice but to buy a TP cover as well as an OD cover from the same insurer.

Difference Between Third Party Cover And Own Damage Cover


Third Party Cover

Own Damage Cover


Only third party liabilities - life and property (up to Rs. 7.5 lakh)

Only own damages suffered by insured's vehicle in an accident, theft or any other mishap

Availability of Add-ons

No availability of add-ons

Availability of all add-ons such as zero depreciation cover, engine cover, etc.

Why Is It Important To Have An Own Damage Insurance Cover?

Although not mandatory but it is advisable to purchase an own-damage motor insurance policy for your vehicle. An OD cover allows you to get indemnified by your insurer for all the damage or loss sustained by your insured's vehicle in an accident, fire, vandalism, theft, natural/man-made calamity or any other unfortunate event. By purchasing an OD cover, you save yourself from bearing the financial liability of getting your vehicle repaired.

Effect of Introduction of Standalone OD Cover on Motor Insurance Industry

The introduction of standalone own damage motor insurance policy will increase the level of competition among motor insurers. Earlier, in most of the cases, vehicle owners used to end up buying a motor insurance policy from an insurer who had a tie up with their car dealers just to meet the legal requirement of owning a TP cover. However, now with the introduction of a standalone OD cover, vehicle owners will have time to do research and purchase an OD cover which best suits their requirements at a date later than the purchase of a TP policy. This will push the insurers to design more customer-oriented OD covers. The increased competition among insurers can also result in insurers lowering the OD premium to attract more customers.

Bottom Line

The introduction of the standalone OD cover is expected to bring a positive change for vehicle owners by bringing greater flexibility to vehicle owners about the purchase of their motor insurance policy along with making motor insurance premiums more attractive.

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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Add-ons For Your Car Insurance Policy

  • Zero Depreciation

    A car's value depreciates constantly with time. Thus, at the time of a claim settlement, the depreciated value of a car is deducted from the claim amount. However, by opting for a zero depreciation add-on you can shift the liability of the depreciation cost to the insurer and get the entire claim amount without any deduction of the depreciation sum. This add-on is generally available till the age of 5 years of car, however, the car age limit varies from insurer to insurer.

  • NCB Cover

    A No Claim Bonus (NCB) is a discount given by the insurer in the premium amount to a car insurance policy holder for not making a claim in the entire tenure of the four wheeler insurance policy. This discount is not available if the policy holder has made even a single claim. However, with the NCB cover, a policyholder will be entitled to receive an NCB discount despite having made a claim subject terms and conditions of insurance company. The NCB discount keeps on increasing with every claim-free year until it reaches 50%.

  • Engine Protection Cover

    A car's engine is by default not covered under either a comprehensive or a standalone own-damage car insurance policy. And therefore, if it gets damaged due water-logging or oil leakage, your insurance company is not liable to pay for its damages. But, if you opt for the add-on known as Engine Cover, you can get your car's engine insured by the insurer for damages incurred due to water ingression as well as leakage of lubricants. Engine Cover is one of the most popular car insurance add-ons and is available against the payment of a nominal premium.

  • Invoice Cover

    If you have a return to invoice cover added on to your comprehensive car insurance policy, you can claim the total ex-showroom price of your four wheeler, taxes and registration charges, in case of total loss. In case of total constructive loss (more than 70% of damage) or theft of your car, an insurance company pays the Insured Declared Value (IDV) of your car as compensation. However, this IDV is lesser than the actual amount paid by you at the time of purchasing your car. When you opt for the add-on called Return To Invoice Cover with your car insurance policy, the insurance company pays the total ex-showroom price of your car plus the taxes and registration charges incurred at the time of purchase, as the claim amount in case of total loss.

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