As per the IRDAI notification dated September 20, the mandatory CPA or compulsory personal accident cover has been raised for both two-wheeler and four-wheeler owners from Rs.1 lakh and Rs. 2 lakh to Rs. 15 lakh for both. And in its view, the annual premium for both renewal as well or on buying new vehicle will see an increase by Rs. 750.
What is compulsory accident cover?
Notably, a comprehensive motor insurance vehicle cover includes three of the major components referred as own damage, third-party and CPA cover. The new mandate given to enhance the cover has been favoured by the insurers given the huge risk such vehicle owners are exposed to when driving.
CPA was introduced in the year 2002 after motor tariffs got revised extensively. This was a compulsory cover charged for vehicle that have been registered in the name of an individual. The premium in lieu of CPA is charged as third-party premium.
In the add-on covers people usually preferred taking CPA as high as Rs. 10 lakh but after the new directive, companies including SBI will offer CPA cover in addition to the mandated Rs. 15 lakh cover as a top up with additional premium for upto Rs. 50 lakhs.
For top up cover, the additional premium amounted to as much as 0.05% of the sum assured value and remained the same as fixed by the insurance regulator, IRDAI.
The personal accident cover is important given the fatal accidents that are witnessed on a everyday basis and one despite his utmost care can even be victim and in such events, insured person assures financial protection to his dependents. So, even in a case when the individual has not taken insurance to a sufficient extent to tide over such an uncalled for event. CPA cover usually helps in bridging this gap if not fully but partially.
How the CPA cover works?
In the event of an accident, the cover is provided even if the vehicle owner is not driving while is seated in the passenger seat.
"A minimum Capital Sum Insured (CSI) of Rs 15,00,000 shall be provided under CPA cover for owner-driver under liability only, under Section III of package policies to all classes of vehicles and bundled covers wherever applicable at the premium rate of Rs 750 per annum for the annual policy. This rate will be valid until further notice," said Irdai.
So, interestingly when the focus of the customer is on the third-party insurance, CPA is offered as a compulsory insurance.
Also as one of the major drawbacks of the motor insurance backed CPA cover is that the plan is not a 24*7 cover and instead the cover is extended only one is alighted on or off the vehicle or is in the vehicle. So other than this one needs a distinct personal accident cover.
Hence, a term insurance or rather a accidental cover that offers financial protection against all sorts of accidents should be zeroed in addition to the mandated CPA cover that comes with the motor insurance