Before purchasing a two-wheeler insurance plan from a reputed insurer, individuals might consider knowing about a set of terminologies related to it. Clarity on these terms will help a policyholder understand the policy document in detail. This, in turn, will allow him or her to renew, buy or raise claims in a hassle-free manner.
Terminologies related to a two-wheeler insurance plan
Individuals planning to obtain a two wheeler insurance plan must be aware of the following terms:
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- First, second and third party
An insured individual possessing a valid insurance plan is the first party. The insurance company or the provider offering the plan is the second party. Finally, a third party is a person who suffers damages due to accidents or collisions caused by the first party.
However, any vehicle or property sustaining damages resulting from accidents caused by a policyholder is also recognised as a third party. In case of third-party damages by an insured vehicle, the vehicle-owner faces liabilities and other legal repercussions.
- Premium payments
Insurance companies charge a certain amount as a premium from insured individuals for availing and the maintenance of their policy and coverage. The insurers set this policy premium by considering factors such as a policyholder’s claim history, age, income capacity, area of residence and more.
One can use an online two-wheeler insurance calculator to evaluate the premium amount before purchasing a plan. Certain factors determine the two-wheeler insurance premium. They are as follows:
- Vehicle’s age
- Fuel type
- Geographical location
- Insured Declared Value (IDV)
- Cubic capacity, and more.
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- Own damage cover
A mandatory third-party insurance plan covers third-party liabilities and litigation issues arising from an accident between an insured vehicle and a third party. However, it does not provide coverage against its own two-wheeler damages. Considering this, the insurance companies offer standalone own damage insurance that covers the insured bike against accidental damages.
Further, an own damaged two-wheeler insurance cover also includes damages caused due to fire, natural or man-made calamities and more. Individuals possessing a third-party insurance plan can get this standalone cover separately for additional protection.
- Insured Declared Value (IDV)
The Insured Declared Value (IDV) essentially determines the market value of a vehicle. It is the maximum value an insurer will pay in case of total loss or damage of a vehicle. Insurers evaluate this value by adjusting the manufacturer’s selling price for depreciation according to the vehicle’s age.
For vehicles equipping externally fitted accessories, IDV calculation is done separately and added on later. The formula for IDV calculation is:
IDV = (Manufacturer’s listed price – Depreciation) + (Cost of accessories – Depreciation)
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- Depreciation value
The actual value of a vehicle reduces over time due to constant wear and tear. This is known as depreciation, and it depends on a vehicle’s age. During the claim process, an insurer deducts this value from the claimed amount before making payment. In case of total loss or irreparable damages, the insurer will subtract the depreciation cost totally.
However, for a partial loss, insurers will consider only the depreciation cost associated with those parts of a vehicle.
- No-claim Bonus
Insurance companies offer a discount on policy premiums to those policyholders who maintain a claim-free year within their policy term. This discount, also known as No-claim Bonus (NCB), depends on the number of non-claim years an individual maintains. Further, if a policy member shifts his or her plan from one insurer to another, the No-claim Bonuses will be transferable.
- Personal accident cover
Under this cover, an individual and his/her family receive compensation for the insured two-wheeler’s accidents resulting in permanent total disability or death. Insurers must mandatorily offer this cover to applicants of both third-party and comprehensive insurance plans. However, vehicles owned by companies, corporates, partnership firms etc., are not eligible for a personal accident cover.
- Add-ons
An add-on facility allows an individual to get overall coverage for his or her bike. One can purchase add-on policies to customise the comprehensive two-wheeler insurance. These add-ons keep you away from financial losses and benefit your two-wheeler in so many ways. Some beneficial add-ons are breakdown assistance, tyre protection coverage, return to invoice cover, zero depreciation, consumable cover and many more.
Out of all the beneficial add-ons, zero depreciation bike insurance is known to be the most important type of add-on for its robustic features. It functions to not depreciate or subtract the value of a two-wheeler despite the wear and tear of any body parts. While riding a two-wheeler in India, an add-on as zero dep bike insurance is an important add-on policy. Because the value for money of your bike will remain high and zero% will be deducted from depreciation and remain new in terms of the market price.
However, to obtain these policies, one needs to pay a nominal amount over and above their policy premiums.
- Exclusions
Although a well-rounded insurance policy offers maximum coverage, there are some limitations to it. For instance, bike insurance policies do not cover damages caused due to overspeeding, drunk driving, etc.
Therefore, one should be aware of such exclusions before settling for a plan to avoid discrepancies during the claim settlement process.
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- Grace period
All the bike insurance policies come with a certain validity period. After the expiry of a plan, some insurers offer a period of 30 days within which a policyholder can renew his policy. During this period, there would not be any inspection. This is known as the grace period, and the duration varies across insurers.
Apart from this, there are several other terminologies related to two-wheeler insurance. However, referring to the aforementioned list before purchasing a new plan can be a good start to avoid confusion.