How Multi-Year Car Insurance Protects Against Premium Hikes And Renewal Hassles

Your car insurance needs to be renewed every year. In fact, you may be fined if you are driving without third-party insurance. Plus, driving without insurance means that you may be fined.

Here is where multi-year car insurance comes in.

Why Multi-year Car Insurance Makes Sense 

A multi-year car insurance policy can result in savings. When a customer buys a three-year policy, the premium rate is locked in at today’s price. This shields them from annual premium hikes that are common due to inflation or rising repair costs. “Additionally, many insurers offer a discount on long-term policies compared to renewing annually. Beyond monetary savings, it also ensures compliance with the mandatory insurance requirement without the risk of missed renewals,” says Pankaj Verma, Chief Technical Officer (underwriting & products), Zurich Kotak General Insurance Company (India).

Another benefit of a three-year policy is that insurers typically factor in the no-claim bonus for the second and third years when quoting long-term policies. “This means that even if a claim is made in the first or second year, the policyholder may still retain the benefit of the no-claim bonus. You also save on your premiums through this method, in addition to saving on premiums in a long-term policy,” says Subhasish Mazumder, head- motor distribution, Bajaj Allianz General Insurance.

The main downside is reduced flexibility. If insurance premiums decrease in the future or if new, more competitive products enter the market, customers with a locked-in three-year policy won’t be able to switch mid-term. “Also, any changes in driving patterns, add-ons, or coverage needs might not be adjustable until renewal,” Sharma.

Who Should Consider A Multi-Year Policy 

Customers should consider a multi-year policy because of the savings on premiums and price advantage. If one can afford to buy a three-year policy, it provides good benefits over a period of time.

Multi-year policies are best suited for first-time car buyers, risk-averse customers, and those who prefer convenience and compliance. It is also a good option for people who plan to retain their vehicle for at least three years, as it ensures protection from premium hikes and renewal hassles. “Yearly policies may be better for: Customers who change vehicles frequently, prefer flexibility to switch insurers or coverage options, or anticipate adjustments in their insurance needs in the near future,” says Verma.