Two Wheeler Insurance

Is Availing a Bike Insurance Mandatory?

By Admin
Feb 25, 2021

The Motor Vehicle Act of 1988 has made it compulsory for all vehicle owners to carry a valid Third Party Insurance cover at the time of riding. This ensures basic financial protection as a third-party legal and liability coverage in case of accidents. However, according to a report on road safety, only one out of three vehicles on the road today are insured. So, starting September 1 2018, IRDAI introduced a new set of guidelines for two-wheeler owners as well as insurance providers. These include the introduction of a long term two-wheeler Third Party (TP) cover of 5 years, mandatory increase in Personal Accident Cover (PAC) from INR 1 lakh to INR 15 lakhs and a boost for Standalone Personal Accident Cover (PAC). 

Before discussing the legal obligations of a two-wheeler owner, let’s understand the two types of two-wheeler insurance: 

1. Third-Party (TP) Insurance

2. Comprehensive Insurance

Third-party liability insurance

Third-party liability insurance is a policy that covers the financial cost of losses or damage caused to a third party vehicle. It is also responsible for compensating the third party person in case of any injury arising due to the insured vehicle. However, this does not cover any loss or damages suffered by the owner of the vehicle.

Comprehensive Insurance

In terms of coverage, the scope of Comprehensive Insurance is much wider. Apart from covering damages caused to the third-party, it also covers “Own Damage” (OD) suffered by the owner. Comprehensive Insurance also provides financial protection against unforeseen incidents such as theft, riots, etc. Loss or damages to the vehicle due to natural calamities like cyclones, floods, earthquakes etc are also taken care of by the insurer. 

New Rules for Penalties for Two Wheelers From September 01 2019 

As per the guidelines issued by IRDAI, the following table summarizes the updated penalties for the most common offences by two-wheeler riders:

Scenario

Updated Penalty 

(from 1st Sept 2019)

Previous Penalty 
General First Time Offence: INR 500; Repeat Offence: INR 1,500.

First Time Offence: INR 100;

Repeat Offence: INR 300 

Violation of Road RulesINR 500 - INR 1,000. Nil
Disobeying the Officer and Refusing to Share InformationINR 2,000INR 500
Driving without a valid Driver’s LicenseINR 5,000INR 1,000
Driving despite DisqualificationINR 10,000INR 500
Driving Under the Influence of Alcohol or any other Intoxicating Substance

First Time Offence: INR 10,000 and/or Imprisonment of up to 6 months.; 

Repeat Offence: INR 15,000 and/or Imprisonment of up to 2 years.

INR 2,000

Why Should You Avail Two Wheeler Insurance:

Despite bike insurance being mandatory, most people avoid buying it. However, there are several reasons including legal and liability cover against third-party losses that may incur in case of an unfortunate accident. Take a look at the prominent reasons below: 

Prepare for Emergencies:

Over the last few years, road accidents have been a steady increase in number. The growth trend in road accidents in the last ten years was an 8% increase annually. This is a reflection of the condition of road safety in India. As a two-wheeler owner, it is advisable to stay safe while driving. While helmets are a physical form of protection, it is equally important to secure yourself financially. In case of any unforeseen events like road accidents, you can secure your vehicle as well as yourself with a two-wheeler insurance policy. 

Third-party liability insurance is compulsory as per the law in India. This policy covers only the damages or losses caused by your bike to the third party or property. It includes a Personal Accident (PA) cover for the vehicle owner, in case of hospitalisation or bodily injuries and death. 

Protection for Your Vehicle: 

A standard comprehensive two-wheeler insurance policy covers a wide range of unexpected scenarios like theft, fire, natural calamities or human activities, vandalism, etc. Apart from these, a Comprehensive Insurance policy also covers the costs for damage or losses caused to your bike due to an accident. A Comprehensive Cover provides coverage in case of “Own Damages” along with Third-Party Liability Cover. Additionally, if your two-wheeler gets stolen, the comprehensive policy also covers bike theft.

New Motor Vehicles Act, 2019

Apart from these updated penalties, as a two-wheeler owner, you also need to know the changes made to two-wheeler insurance guidelines. 

Here are the top three changes in two-wheeler insurance policies – the introduction of long term two-wheeler Third Party (TP) cover, enhancement in Personal Accident Cover (PAC) and boost for Standalone Personal Accident Cover (PAC). 

1. Introduction

Compulsory Multi-year Third Party Policy +Comprehensive Policy for New Two Wheelers 

All two-wheeler owners with vehicles registered on or after September 1, 2018, have been notified about the change in the premium amount and term of their Third-Party Bike Insurance policy. Two-wheeler owners need to pay the premium of their TP insurance for 5 years upfront. This rule, however, does not apply to owners who have purchased before the said date. All other two-wheeler owners can continue paying their two-wheeler premium like before. It is important to note that this is only meant for the premium collected for Third Party Insurance. The premium amount is decided by IRDAI depending on the capacity (in CC) of the vehicle. All other premiums (for Comprehensive or Own Damage Cover) can be paid yearly. 

PRO-TIP: The upfront payment on the Insured Declared Value (IDV) and No Claim Bonus (NCB). 

Options Available for New Two-wheeler Owners: 

As a two-wheeler owner, you have two options available – 

a. Multi-Year Long Term Comprehensive Policy (TP = 5 years + OD = 5 years) 

OR 

b. Bundled Policy (TP = 5 years + OD = 1 year) 

If you select a Multi-Year Long Term Comprehensive Policy, you will receive the benefits of both Third Party (TP) and Own Damage (OD) coverage for 5 years. The premium collected will likely be equal to that of 5 years. So, you do not have to worry about renewal for 4 years from the date of issue. 

While in the case of Bundled Policy, Third Party (TP) coverage is for 5 years but Own Damage (OD) cover is limited to 1 year only. The premium may be comparatively lower than Multi-Year Long Term Comprehensive Policy. However, the OD premium will have to be renewed every year. 

2. Increase in Personal Accident Cover (PAC) 

To prevent an unexpected financial burden on the two-wheeler rider, in the event of an accident, IRDAI has increased the coverage from INR 1 lakh to INR 15 lakh. This rule applies to both - new as well as existing two-wheeler owners. The annual premium has also been revised from INR 50 for a cover of INR 1 lakh to INR 750 for a cover of INR 15 lakh. 

3. Boost for Stand-alone Personal Accident Cover (PAC) Policies 

A Personal Accident Covers compensates the policyholder by paying the insured sum in case of partial or total disability or death arising due to an accident. From January 1 2019, IRDAI has unbundled the mandatory personal accident cover. This new move has made it possible for insurers to issue a Stand-alone policy. So, two-wheeler owners who have another bike, with a valid PA cover, do not need to buy the cover again.

Summary: 

As per IRDAI, it is mandatory to have Third Party Bike Insurance. You can easily avail this policy online in just a few simple steps. Compare quotes from different Bike Insurance Company and select your policy term (either one-year or multi-year). However, if you opt for a multi-year policy, you can save up to 20% on premium payment. It is advisable for you to opt for a Multi-Year Long Comprehensive Cover that also takes care of Own Damages (OD). A number of insurance providers are providing heavy discounts on premium rates too. As an owner, it will take away the trouble of remembering and renewing your two-wheeler policy every year.

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