Two-wheeler insurance is mandatory in India, and you could buy either a third party liability insurance or a comprehensive insurance policy that also covers damage to the your vehicle and yourself. Most policies have to be renewed annually, but of late insurance companies are also offering 3-year policies that need to be renewed only at the end of the policy period.
Here are some points to be kept in mind about two-wheeler insurance:
No grace period:
Two-wheeler insurance policies do not get any grace period for renewal, which means that if your policy is expiring on August 10, 2016, and you try to pay the renewal premium on August 11, the policy will be considered lapsed and you can renew it only after a physical inspection of the vehicle. In order to keep the insurance protection ongoing, it is important to ensure that you renew the policy regularly – annually or once in 3 years as per your policy period. If you meet with an accident on a day when the insurance is not in force, you will lose lakhs of rupees in vehicle damage, compensation for the other party in case of a collision, and personal injury.
The older a vehicle is, the lesser its Insured Declared Value (IDV) would be. IDV is the maximum sum assured on theft or complete loss of a two-wheeler, fixed by the insurance company based on the current market value of the vehicle. It is calculated by subtracting value depreciation from the vehicle maker’s selling price. If the vehicle has any fittings that did not come with it from the makers, the price and depreciation of that is calculated and added to the IDV separately. So if you bought a motorcycle at Rs. 75,000 in July 2016, then the IDV of the vehicle would be almost equivalent to the purchase price because it is a new vehicle at the moment. But as time passes, depreciation is factored in and the sum assured goes down.
The estimated depreciation calculated on vehicles as per their age is as given below:
|Age of vehicle||Depreciation|
|Not more than 6 months||5%|
|Between 6 months and 1 year||15%|
|Between 1 and 2 years||20%|
|Between 2 and 3 years||30%|
|Between 3 and 4 years||40%|
|Between 4 and 5 years||50%|
Beyond 5 years, the IDV of a vehicle is calculated based on a mutual agreement between you and the insurance company, and not based on value depreciation. The insurance company appoints a surveyor to conduct an evaluation of the two-wheeler’s condition and determine its price.
You may think that the premium of a two-wheeler insurance would go up as the vehicle ages. However, it is the converse that is true. As the IDV of a vehicle goes down, the premium also decreases. But this does not mean that you should try to show a lower IDV in order to pay less premium. Because a lower IDV means that in case of an accident, you cannot claim more than the IDV even if the actual cost of your vehicle is higher than that. So it is important that you declare the right age of the vehicle and adjust the IDV accordingly.
Check for add-on options:
At a slightly higher premium, you could add covers such as total cover where you get road tax, registration amount, insurance premium and the sum assured on a claim are available for vehicles up to 15 years old. Check with your policy provider on the most beneficial options that can be availed on older vehicles.