Common Bike Insurance Terms You Should Know About

Posted on: Nov 12, 2021 | 3 mins | Written by: HDFC ERGO Team

Common Bike Insurance Terms You Should Know About

Two-wheelers have many advantages and that’s why it is the preferred mode of transport for lakhs of Indians. Affordable, fuel-efficient and easy to drive are some of the top reasons why most Indian households prefer two-wheelers. But rash driving and poor condition of roads also make bikers more vulnerable to accidents and therefore, they must have insurance to pay for the damages in case of a mishap.

Bike insurance is not just a legal mandate, but it can also offer you financial assistance in case your bike is involved in a collision or any accident. Having the right type of bike insurance is therefore very important when you have a bike, and choosing the most suitable one is crucial. Typically, there are two types of insurance plans that bikers usually opt for. Having a clear understanding of each would help you make a decision:

Types of Bike Insurance

• Third Party Bike Insurance

Third party bike or the third party bike insurance is the most elementary kind of insurance which is compulsory for every motorized vehicle in the country, according to the Motor Vehicle Act of 1988. This covers bodily injury (or death) or property damages of any third party. However, it should be noted that third party bike insurance policy would not offer any compensation/ coverage for the damages that are incurred by your bike in case of an accident.

• Package/Comprehensive Policy

As the name suggests, comprehensive bike insurance is a comprehensive cover. It includes damage to your own vehicle as well as that of the third party. Though a comprehensive bike insurance plan is optional it is highly recommended to go for this insurance policy. Apart from giving overall protection to your beloved bike, it also allows a lot of peace of mind, as even in case there is a mishap, your insurer would offer you enough coverage.

Common Bike Insurance Terms

There are many terms in the bike insurance terminology that are used in insurance and one must have a good understanding of the policy document to make better decisions at the time of buying/renewal or claims. Let's take a look at the common bike insurance terms you should know:

• First Party, Second Party, and Third Party:

Well, the first party is the person buying the policy (the two-wheeler owner), the second party is the insurance company and the third party represents the property/person involved in the accident caused by the first party.

• Premium

It is the amount paid by the first party to the second party for providing the bike insurance for the said policy duration. In the case of third party bike insurance the premium is decided by the IRDAI on the basis of the vehicle’s cubic capacity, however in the case of comprehensive bike insurance, the premium amount depends on multiple factors like the value of the vehicle (insured declared value), make & model, age, area of registration of the vehicle, add-ons selected, company policy etc. The premium has to be paid on or before the start of the policy duration.

• Cover

It is the maximum monetary liability of the insurance company in case the policyholder files a claim. Keep in mind the coverage you receives depends entirely on the kind of policy that you have chosen. A comprehensive bike insurance policy offers wider coverage as compared to a third party bike insurance.

• Insured Declared Value (IDV)

In case of theft, the insurer has to pay the insured declared value of the bike less applicable excess/deductible as per policy terms & conditions. The maximum sum payable by the insurance company to the insured member in case of a total loss/theft or any other own damage claim of a motorcycle is the Insured Declared Value (IDV).

• Zero Depreciation Cover

zero depreciation bike insurance is an add-on cover that you can buy along with your comprehensive bike insurance, by paying a little extra premium. With this cover, the depreciation costs of your vehicle can be nullified. You should know that every year, the vehicle suffers a loss in value, and the loss due to depreciating parts is not covered when a claim is settled. With zero dep you can reduce your out-of-pocket expenses when you file a claim.

• No Claim Bonus (NCB)

No Claim Bonus is a reward given to the vehicle owner for not making any claim during the entire policy duration. This is offered in the form of a discount on your own damage renewal premium. You can claim up to a 50% discount on your upcoming premium as the NCB discount.

• Personal Accident Cover

Under personal accident cover, the policyholder/driver is compensated by the insurance company in case the driver suffers injuries or unfortunate death due to a road accident. The admissible medical bills are paid off by the insurance company. If the person losses a limb or an eye, 50% of the sum insured is given to him/her as compensation. In case of the death of the policyholder, the family receives a sum of INR 15 lakhs as a death benefit. Usually, a personal accident cover is provided under a comprehensive motor insurance plan. However, with HDFC ERGO, customers get personal accident coverage even with third party bike insurance. A personal accident cover is a must-buy no matter which bike insurance policy you opt for.

• Exclusions

Not all claims are accepted as there are some exclusions in the policy. For instance, if the accident happened because of over-speeding or in a state of inebriation, the insurer is not liable to pay for the damages. The policyholder must be well aware of the several exclusions in the document, often mentioned in the fine print.

• Add-Ons

Then there are additional benefits like add-ons such as zero depreciation cover, emergency assistance cover, etc. that the policyholder can get by paying an additional premium.

• Grace Period

An insurance policy comes with a specific tenure. Most people generally buy coverage for one year. You need to renew your policy before it expires so as to avoid any break in the coverage. If you miss a renewal, your insurer generally gives you a period of 30 days to get the policy renewed. This period is called the grace period and after this, your policy would be cancelled and you’ll have to buy a new one. Keep in mind that a claim request cannot be raised during the grace period.

• Depreciation

Due to everyday use and general wear and tear, the value of your bike decreases with time. When a claim is raised, your insurance provider would calculate the depreciating value of the claimed parts and subtract that amount from the total claim amount. Depreciation thus can be an important factor when settling a claim as the older your vehicle gets, the higher would be its depreciation value. Given below are the depreciation rates as set by the IRDAI.

Age of the car	Depreciation value
0-6 months	5%
6 months to 1 year	15%
1-2 years	20%
2-3 years	30%
3-4 years	40%
4-5 years	50%
Above 5 years	Decided mutually between the insurer and the policyholder

• Deductible

In simple terms, a deductible is a portion of the total claim amount that you are to pay from your pocket. For example, when a claim is raised the total repair bill is INR 10,000. Suppose your selected deductible is INR 2,000, so you will pay INR 2,000, while the remaining INR 8,000 will be paid by the insurer.

The cost-sharing or the deductibles in bike insurance are of two types:

• Compulsory Deductible

As the name suggests, a Compulsory deductible is where you, the policyholder, have to pay a certain amount compulsorily. As per the guidelines of the IRDAI, two-wheeler insurance comes with a mandatory INR 100 deductible.

• Voluntary Deductible

Contrary to compulsory deductibles, a voluntary deductible is an optional feature. You can choose a deductible that you consider to be a decent amount. Choosing a higher deductible will surely decrease your bike insurance premium, but at the same time keep in mind that when raising a claim you’ll have to pay this amount, from your pocket, over and above the compulsory deductible.

• Cashless Garage

One of the biggest advantages, when you buy bike insurance, is the cashless garage service that you can enjoy. Cashless garages or network garages are garages with which your insurer has a partnership/ collaboration. When you take your vehicle for repair at such a garage, the insurance company settles the bills directly with them. You end up paying only for the uncovered expenses/deductible. Getting repairs done at a cashless garage thus becomes very convenient.

However, you must remember that a cashless garage service is only available at the network garages of HDFC ERGO. Currently, there are more than 8200 cashless garages of HDFC ERGO. All you have to do is take your vehicle to a network garage and the admissible bills will be settled directly by your insurance provider.

Conclusion

The policy papers of bike insurance have various terms and clauses. It is quintessential that you understand all the bike insurance terminology. Your insurance provider and the employees are always ready to help you out if you are unable to understand any terms. So, do not skip reading the fine print so that you get your claim settled easily without much back and forth.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by

Mukesh Kumar | Motor Insurance Expert | 36+ years of experience in insurance industry

A veteran in the insurance industry, Mukesh Kumar has the expertise of handling various functions like Business Development, Underwriting, Claims, Human Resources, Quality Management and Marketing. With rich knowledge of the industry, he loves to share his views on topics of insurance sector and takes special interest in educating people on advantages of having insurance.

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