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CAR INSURANCE

Short Period Cover in Motor Insurance

Neha Gadoo Neha Gadoo 04 October 2016

Is it important to get a short period cover in motor insurance? Read on to understand the types, premiums, and conditions associated with this form of insurance.

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You have heard it on and again when you were buying your vehicle, either a two-wheeler or a four-wheeler, that a motor insurance policy is a mandatory requirement. Even if you dodged the all-too persuasive talks of your auto dealer, you can not avoid a motor insurance cover.

Whether you are buying a new vehicle or using an old one, you must have a valid insurance cover on your vehicle at all times if you do not want to be awarded that all-too-easy fine. I am repeating once again just to refresh your memory that according to the Motor Vehicles Act, every vehicle used on Indian roads should have a valid third party insurance cover on it.

While most of you must know the legal compulsion, some of you might wonder what a third party insurance policy actually is. A motor insurance policy comes in two varieties. One is the third party policy while the other one is the comprehensive package policy. Let us understand these types in brief:

Third Party Car Insurance Policy

This is a mandatory policy and comes cheap. The policy covers any damage that your vehicle might cause to any third party or property. ‘Third Party’ refers to any person or property other than the vehicle owner (who is the ‘Second Party’) and the vehicle (‘First Party’) that might suffer damages due to the vehicle. Since the law mandates this plan, the premium is also uniform and fixed by the IRDA.

Comprehensive Car Insurance Package Policy

The above plan specifically excludes damages incurred by the vehicle owner and the vehicle itself, a comprehensive package policy bridges this gap. The policy provides the mandatory third party coverage and also own damage coverage. Premiums are higher than third party plans and are fixed by the insurer.

Whatever type of policy you buy for your vehicle, it has a term of one year. After the coverage period expires, the plan requires renewal. Thus, motor insurance plans are annually renewal plans where the coverage would not extend beyond a period of 12 months from the date of issuance of the policy. It is said that all rules have an exception, and it is so in this case too. Under some circumstances, the coverage can be extended beyond a year. This extended insurance is called ‘short period cover’ and there are some rules for this cover. Let us understand what these rules are:

Conditions for Short Period Cover

  • The short term cover would be extended beyond the original 12-month coverage provided by the plan.
  • The period of extension would be lower than 12 months.
  • The extension would be allowed either for arriving at a new renewal date or for any other reason which should be convenient to the insured.
  • The extra premium would have to be paid for availing this cover which would be a pro-rated premium of the actual annual premium charged under the plan.
  • The policy should compulsorily be renewed with the same insurer from whom this short period cover feature is availed.
  • Such a renewal should be done immediately after the expiry of the tenure of the short period cover.
  • The cover would be provided only when the insured attaches a Warranty, containing a specified declaration, to the policy.
  • Short period cover extensions are not available with Third Party Plans. Only comprehensive package plans have this feature.

Premiums for short Period Cover

As stated above, an additional premium is payable for such short term cover feature. The said premium is calculated on a pro-rated basis as a percentage of the annual premium. The rate depends on the duration of the short period cover. The table below shows the rate of additional premium payable for the cover:

Period of extension % of annual premium
Less than 1 month 20%
More than 1 month but lower than 2 months 30%
More than 2 months but lower than 3 months 40%
More than 3 months but lower than 4 months 50%
More than 4 months but lower than 5 months 60%
More than 5 month but lower than 6 months 70%
More than 5 month but lower than 6 months 80%
More than 7 month but lower than 8 months 90%
More than 8 months 100%

So, now you know what a short period cover is and what premium it entails. So, the next time you come across the term, don’t scratch your heads!

Neha Gadoo
Written by Neha Gadoo
Daring and Bold, Neha loves philosophy, trekking and walking bare feet in the rain. Loves talking and can stare out of a car window for hours continuously.