According to experts, economic growth is a known influencer of personal transportation demand. The growth story of the Indian economy in the last several years has helped the Indian two-wheeler market to emerge as the second largest globally (after China). However, an increasing number of vehicles means higher risks of accidents; therefore, under the Indian Motor Vehicle Act, third-party 2-wheeler insurance has been made mandatory for all vehicles.
An insurance policy is a contract where the insurer agrees to cover the policyholder’s financial risks from unforeseen losses against payment of approved charges. Is long–term bike insurance advantageous for the policyholder against an annual cover? Let us find out, but before that, here is a quick recap on the types of 2 wheeler insurance.
In India, There are two types of two-wheeler insurance: a) Third –party coverage and b) Comprehensive policy.
Third-party insurance covers the losses caused to third-party individuals, businesses, or vehicles by the insured two-wheeler. On the other hand, comprehensive plans cover the bike owner’s third-party risks and risks from own damage, financial losses due to an accident, theft, and the like.
Annual or a Multi-term Policy: Which One to Choose?
While the motor vehicle laws make third-party insurance compulsory, it is best to consider comprehensive coverage due to the additional value such policies offer to the insured.
A long term bike insurance policy, for five years, has more benefits for the bike owner. Some of the reasons in favour of a five-year insurance plan are:
Savings on Insurance Premiums
In India, the insurance premium rates are regulated by the Insurance Regulatory and Development Authority (IRDAI), and insurers cannot exceed the range fixed by the regulator. Generally, IRDAI enhances the premium rates by about 15 to 20 % annually. Therefore, you save on the yearly rate increase when you choose a 5-year plan since the premium will cover the entire five-year policy tenure. Hence, the savings can be reasonably significant on a five-year 2-wheeler insurance policy.
The benefit of a No Claim Bonus (NCB)
No Claim Bonus or NCB is an incentive the policyholder earns for a claim-free year on a comprehensive insurance policy. The incentive is offered as a discount on the renewal amount for the following year’s policy. The NCB can go up from about 20% to over 30% in the fifth claim-free year for timely renewals. However, in the event of a claim, irrespective of the amount, during the tenure of an annual policy, the NCB is lost.
On a five-year 2-wheeler insurance policy, the NCB does not become nil even if there is a claim, but it reduces to the applicable percentage slab prior to the claim period. Therefore, the insured continues to enjoy the benefits of NCB.
Eliminates the Hassles of Renewal
Opting for a five-year policy is a smart way of avoiding yearly renewals. While one can now renew most 2-wheeler insurance policies online, many people still perceive renewals as time-consuming and avoid timely renewals. Besides, some others always miss the renewal date despite follow-ups by the insurance providers and have to pay the penalty as a result.
Reduced Risk of a Policy Lapse
Vehicle owners in remote areas may not receive timely renewal reminders, digital or otherwise. Such circumstances may lead to a policy lapse which is a punishable offence.
On long-term bike insurance of five years, you are safe and protected for a relatively more extended period against the many consequences of a lapsed policy. For example, when you purchase a new policy after the lapse of the previous one, the insurer is likely to inspect the vehicle. In addition, the new premium will be higher than the renewal amount since the insured Declared Value (IDV) is expected to impact negatively due to the policy lapse.
No money loss on Cancellation or termination
If the insurer provides unsatisfactory service, a policyholder can cancel the contract anytime and claim a refund for the proportionate premium amount against the unutilised period. In addition, a policyholder may get the accumulated NCB transferred to a new policy with a different insurer subject to the specified terms and conditions.
Similarly, against the policy closure due to a complete loss or theft of the vehicle, the policyholder can claim a portion of the premium to be refunded against the balance period of the insurance.
However, most importantly, effective September 2018, the regulatory authorities of motor vehicles in India have made it mandatory to buy a 5-year third-party insurance plan when purchasing a new two-wheeler.
Conclusion
It is apparent that long-term comprehensive insurance, like a five-year policy, offers better value to a bike owner. One can easily buy insurance plans for two-wheelers online and also in a conventional offline manner.
Several insurance providers have attractive and customer-friendly schemes- For example, HDFC ERGO. With a 100% claim settlement ratio, HDFC ERGO has top-of-the-line consumer benefits like emergency roadside assistance, a network of over 8500 cash-less garages for quick servicing of your bike and many more.
Summary
There are two types of two-wheeler insurance, comprehensive and third party; both are available in an annual or a multi-term format.
A multi-term, like 5- year 2-wheeler insurance, offers better value as the policyholder saves on the premium compared to yearly plans. Moreover, the insured also gains on the No Claim Bonus. Additionally, the policyholder has a reduced risk of a policy lapse and can avoid yearly renewal hassles. Moreover, there is no loss on Cancellation or termination of a five-year insurance policy.
Among others, HDFC ERGO is a reliable insurance provider.
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