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Consumers feeling price pressure on account of rising inflation are in for further shock as buying vehicles will now become costlier from June 1 with government increasing third party motor insurance premium rates. 

In a notification issued on Wednesday, the ministry of road transport and highways (MoRTH) has increased third party premium rates for all categories of vehicles that is set up add up to overall cost of buying a vehicle. 

Unlike other insurance products, buying a third-party insurance is mandatory under legislation for motor vehicles. The insurance is taken for This insurance cover is for any collateral damage to a person (third party) in cases of road accident.

According to the revised rates notified by the MoRTH as Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022., private cars with an engine capacity of 1,000 cc will attract rates of 2,094 compared to 2,072 in 2019-20. Similarly, private cars with an engine capacity between 1,000 cc and 1,500 cc will attract rates of 3,416 compared to 3,221, while owners of cars above 1,500 cc will see a drop in premium from 7,897 to 7,890.

Two-wheelers over 150 cc but not exceeding 350 cc will attract a premium of 1,366 and for two-wheelers over 350 cc the revised premium will be 2,804. Similarly, the rates of base premium for commercial vehicles with gross vehicle weight not exceeding 7,500 kg has been kept at 16,049. The third-party premium for agricultural tractors upto 6 HP has been kept at 910.

Rates have also been revised for three-year third party single premium plan for four wheelers and five-year single premium plan for two wheelers. Also, the green electric vehicles, running on batteries will also have to shell out more towards third party insurance premium from next month. 

The insurance premium rates were frozen for last two years due to Covid-19 pandemic. Earlier, TP rates were notified by the Insurance Regulatory and Development Authority of India (IRDAI). This is the first time that the MoRTH has notified the TP rates in consultation with the insurance regulator.

Even with higher third-party insurance premium, MoRTH has provided a discount of 15% on premium for educational institution buses. A discounted price of 50% of the premium has also been allowed to a private car registered as Vintage Car and a discount of about 15 % and 7.5% on the premium has been allowed for Electric and Hybrid Electric Vehicles, respectively. 

With notification on the new rates coming late, insurance companies would have less than a week’s time to update their systems with the changes. Premium revision was earlier carried annually giving weightage to inflation and claim rates.

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