Mr. Kushagra was ready to purchase his dream bike. After thorough analysis and comparison, he had carefully selected a dealer, secured funding, and prepared all the necessary paperwork for registration. However, while discussing his purchase with a friend, he learned that having insurance for two-wheelers is mandatory under Indian law.
Mr. Kushagra was then perplexed because insurance terminology was a whole universe of jargon and expressions he was unfamiliar with. He now has to devote a lot of time and effort to understanding insurance procedures and terms.
If you are stuck in a similar situation, we are here to help you. Here's a list of 10 essential insurance terms you need to know to understand the ins and outs of a two-wheeler insurance policy. With this list, you will no longer face trouble while purchasing, renewing, or making insurance claims.
10 Most Important Two-wheeler Insurance Terms Every Beginner Should Learn
1. Parties Under Bike Insurance
There are usually three parties when it comes to two-wheeler insurance:
- The first party is the insured person, including the two-wheeler insured.
- The second party is the insurer or the insurance company which provides compensation (in the event of an accident) in exchange for premiums.
- The third party is the person affected in the accident with the first party.
2. Comprehensive Cover
A comprehensive bike insurance policy helps immunise the policyholder against third-party liabilities from an accident involving the insured two-wheeler. In addition, it compensates policyholders for their own damages resulting from an accident, theft, and natural or man-made disasters. Amidst all, you can add several add-ons to customise your two-wheeler insurance policy.
3. Third-party Insurance Plan
As the name suggests, a third-party bike insurance policy protects against the damages caused to the third-party person or property. As per Indian laws, acquiring a third-party insurance plan is compulsory before driving your two-wheeler. Failure to do so would result in a fine and maybe even imprisonment.
The Insurance Regulatory and Development Authority of India (IRDAI) has revised the premium rates for third-party coverage for FY 2022-23. They have been in effect since Jun 1, 2022. They are as follows:
|Cubic Capacity of Two-wheelers||Single-year Third-party Premium (INR)||Long-term Third-Party Premium (INR.)|
|Less than 75cc||538||2,901|
|Between 75cc and 150cc||714||3,851|
|Between 150cc and 350cc||1,366||7,365|
The premium is the charge paid by the insured person to the insurer in exchange for the insurance cover for a certain period. This sum is due each year and is based on several factors, including the vehicle's cost, model, and manufacture date.
Other elements that determine the premium include:
- The vehicle's Cubic Capacity (CC).
- Purchase location.
- The coverage chosen by the policyholder.
- The coverage chosen for the accessories.
5. Grace Period
Every two-wheeler insurance policy has a period of validity. Some insurance firms enable consumers to renew their contracts without examination within 90 days of expiration. This interval of 90 days is referred to as ‘the grace period’, and its length may differ from one insurer to another.
6. Insured Declared Value
When settling a claim, the amount an insurance company reimburses the policyholder is known as the insured declared value (IDV).
IDV in a two-wheeler insurance policy depicts the current market value of a two-wheeler.
The IDV in bike insurance is the value for which the vehicle is insured and decreases with time due to depreciation. The IDV of a motorcycle can be calculated with the formula mentioned below:
IDV = manufacturer's ex-showroom price + sales tax + cost of components not included in quoted selling price - depreciation charges - registration and insurance costs
7. Zero Depreciation Cover
This is one of the optional add-ons in a two-wheeler insurance policy. Zero depreciation bike insurance add-on cover provides scope for higher claim amounts by allowing no deduction for your vehicle’s depreciation. If you include this in your plan, you will not be responsible for the depreciation cost of your vehicle's parts.
8. No-claim Bonus
The no-claim bonus (NCB) in bike insurance refers to a discount entitled to the policyholders if they have not made any claims during the policy period. These discounts are available upon the payment of the renewal premium.
The NCB can fetch up to a 50% discount on insurance premiums if you have not made any claim for multiple consecutive years.
Read more - How to Calculate NCB for Two Wheeler Insurance?
9 Personal Accident Cover
In the event of an injury or death due to an accident, personal accident cover protects the insured from legal and monetary liability. Even in the case of partial or total incapacity, policies having personal accident cover provide compensation.
An insurance policy excludes some incidences which are not compensated by the insurer. A policyholder must be aware of these exclusions under a two-wheeler insurance policy to avoid discrepancies during bike insurance claims. These incidences may include accidents caused by rash driving or drink-and-drive cases.
The Bottom Line
Purchasing an insurance product by blindly following the agent’s advice may land you in trouble when claiming, renewing, and adding new features to your policy. Becoming familiar with these essential two-wheeler insurance terms will help you purchase a new insurance policy online. Knowing these terms would also ease the process of claiming the insurance cover or renewing or surrendering the policy. For detailed knowledge of various insurance terms and policy options for bike insurance, visit Paytm Insurance.