A Starter’s Guide to Know About Two Wheeler Insurance in India
Two-wheeler insurance is the type of motor insurance coverage applicable to bikes or two-wheelers. The Motor Vehicles Act (MVA) of 1988 introduced the concept of two-wheeler insurance in India. Under this act, all vehicles throughout the country need to have a valid insurance policy. In the absence of a valid policy, vehicle owners attract heavy penalties and even imprisonment. Like all other insurance products, The Insurance Regulatory and Development Authority of India (IRDAI) regulates two-wheeler insurers too.
Types of Two Wheeler Insurance in India
There are two types of two-wheeler insurance policies available - Third-Party Liability Insurance (compulsory as per the Act) and Comprehensive policy.
- Third-Party Liability Insurance - Third-party two-wheeler insurance is mandatory in India. This policy ensures coverage for third-party damages or losses only. A Third-party includes any person or property apart from the owner of the insured vehicle. Remember, the pillion rider of the motorbike is not considered a third party. This policy also provides a personal accident cover for the owner. However, it does not cover any losses or damages incurred during an accident or theft of the insured bike.
- Comprehensive Policy - Although it is not compulsory in India, most two-wheeler owners prefer it. This policy provides overall financial protection and security for the two-wheeler. It covers the cost of ‘own damage’ as well as any third-party loss or damages caused by the insured vehicle. Moreover, a comprehensive two-wheeler policy covers theft and vandalism.
Difference Between Third Party Liability Cover and Comprehensive Policy with a Real-life Example
Ajay and Sagar both brought a brand new Honda CB Unicorn self-start 100cc bike in January 2018. In Mumbai, the on-road price for this two-wheeler was INR 85,000. Ajay decided to insure his bike with the mandatory third-party cover only. Sanjay invested in a Comprehensive policy (which covered both own damage + third party liability cover). Third-party premiums consider Engine CC while calculating the premium amount. So, let’s assume the cost of Third-party liability cover for Ajay was INR 750. While the cost for a Comprehensive policy for Sanjay was INR 1,500.
In August, both met with a small accident, and the total repair cost was estimated to be approximately INR 5,000. Since Ajay only has a third party policy, the entire cost for repair will be paid by him. His insurer will only pay third party property damage costs. There is no compensation for the damages incurred on the bike. While Sagar’s who bought a comprehensive policy can demand the insurance company to pay for the repair cost.
| Key values | Ajay (Only third-party liability) | Sagar (Comprehensive policy) |
|---|---|---|
| Premium amount paid | INR 750 | INR 1,500 |
| Third-party damages | Covered by the insurer | Covered by the insurer |
| Cost for Own-damages | Not Covered by the insurer | Covered by the insurer |
| Total expenditure | INR 750 + 5000 | INR 1500 |
| Savings | INR 0 | Approx. INR 3000 |
Note: Prices are indicative only and subject to change.
From the above example, it is clear that Sagar’s investment was better than Ajay’s investment. The total expenditure amount paid by Ajay was INR 5,850. Whereas Sagar had to only pay INR 1500. It may seem like Ajay had to pay a lower premium amount. But in the long-term, Sagar’s investment proved to be better. Also, the net savings for Sagar was considerably more than Ajay.
Even when the engine is turned off, a two-wheeler can cause severe damages. If it slips down on an inclined road, it may lead to accidents or unintentionally damage property. Hence, just like any other valuable item, it needs to be insured.
Supreme Court’s Order:
The Supreme Court of India has made long-term 3rd party bike insurance mandatory for all vehicles sold on or after September 1st 2018. This is done to ensure financial protection for vehicle owners in case of unfortunate accidents. A standard comprehensive two-wheeler policy covers the cost of damages incurred to the insured vehicle as well as third-party property or person.
Summary:
There are two types of two-wheeler policies - third party liability and comprehensive policy. As per the laws of India, third party liability insurance is a must-have for all vehicle owners. It offers financial protection against third-party losses or damages caused due to the insured vehicle. However, the preferred type of two-wheeler insurance is a comprehensive policy. This policy includes both own damages as well as third party liabilities. Do not forget to compare the premium and benefits offered by different insurers before purchasing.