Here's why cars will likely become costlier in Tamil Nadu from next month

The Madras High Court earlier this week has ruled that ‘bumper-to-bumper’ insurance has to be made mandatory for all new private vehicles being sold. This ruling will be effective from September 1, 2021. The Madras HC also stated that this bumper-to-bumper insurance should be in addition to the coverage of the driver, occupants and the owner of the vehicle for up to five years.

The order means that the accident victims in Tamil Nadu will now have larger insurance coverage on their side.

Madras High Court judge S. Vaidyanathan also made it clear in his ruling that the order will not bar the claimants from claiming compensation for the death of the deceased from the owner of the vehicle.

The ruling came in response to a writ petition from the New India Assurance Company Limited in Avalpoondurai. The insurance company was challenging the orders of the Motor Accidents Claims Tribunal, Special District Court in Erode dated back to December 7, 2019.

If the directive of the Madras High Court is implemented, it is most likely to shot up the acquisition cost of the new private vehicles from September 1. The increasing vehicle price, sky-high fuel price and other economic issues are already hurting vehicle sales. With the upcoming festive season expected to boost up the sales, the automakers are hoping for a recovery in sales numbers. Right ahead of the festive season, implementation of this ruling might hurt sales of private cars.

What is 'bumper-to-bumper' insurance?

Bumper-to-bumper insurance is a type of vehicle insurance that offers the owner of the vehicle complete coverage. This type of insurance doesn't deduct the depreciation value from coverage whenever the vehicle is involved in an accident or faces some damage that needs insurance coverage.

In bumper-to-bumper insurance, the insurer pays out the entire cost of the replaced body parts for the vehicle. However, this insurance doesn't cover engine damage caused by oil leaks or water intake.

The bumper-to-bumper insurance provides the vehicle owner with a wide range of coverage. But, this type of insurance also comes with higher premiums. This type of insurance demands at least around 20-30% higher premiums compared to the basic comprehensive vehicle insurance policy.