Protecting your new bike with a suitable two-wheeler insurance policy is among the most important steps you can take to protect your vehicle. On September 1, 2018, a Supreme Court ruling in India made it mandatory for every bike in India to be covered by a 5-year third-party two wheeler insurance policy. This measure was taken to ensure that the majority of two-wheelers would be insured and also to reduce the number of expired and lapsed bike insurance policies.
However, the rule was withdrawn in 2020 as mandatory long-term policies drove up the on-road prices of two-wheelers, affecting their sales, which were already impacted by the COVID-19 pandemic. However, vehicle owners can still ‘opt’ for long-term bike insurance policies.
What is a Long-Term Two-Wheeler Insurance Policy?
Long-term two-wheeler insurance is also known as multiyear two-wheeler insurance. It is when the tenure of your two-wheeler policy is more than 1 year.
Several insurance providers in India now offer multiyear policies, though not compulsory, which customers can choose, depending on their requirements and budget. Hence, someone who wants to avoid the hassle of renewing their two-wheeler policy each year might want to select an insurance cover of more than one year.
Advantages of Long-Term Two-Wheeler Insurance Policies
- You can save on premium: With a long-term bike insurance policy, you can make only a one-time premium payment that will keep the policy valid for multiple years. The insurance companies as well as the IRDAI revise the insurance premium rates every year. However, with a multiyear insurance policy, you need not worry about the premium hike since you are not required to renew your policy annually. Thus, you can save efficiently on your two-wheeler insurance premium.
- No hassle of renewing your policy each year: With the two-wheeler insurance policy being valid for more than one year, there will be no need to check the bike insurance to renew it every year. This means at the end of each year your policy won’t lapse because you didn’t renew it. You can save yourself from the hassle of remembering the dates or risk being caught without bike insurance when you are commuting on your two-wheeler. You are also protected from the damages that your bike may face and you won’t have to pay anything from your own pocket. A one-time premium payment takes care of everything related to your bike’s protection for the next few years.
- You can save on your No Claim Bonus (NCB): The No Claim Bonus is a discount that you get from your insurer on your premiums if you refrain from filing a claim during the tenure of your bike insurance policy. The NCB works a little differently with a long-term bike insurance cover. While in the case of a one-year policy, filing a claim during the year will lead to you losing your NCB discount completely, doing the same during your long-term insurance term will only reduce the discount to the previous percentage slab and not completely negate it. This means you will still be able to avail of the NCB benefit.
- You can avail of a refund on terminating the policy: By terminating your one-year insurance cover, you are not eligible for any refund on the premiums paid for the policy term. However, if you terminated your multiyear two-wheeler policy due to loss or theft of your bike, then you will receive a partial refund on the premiums that have already been paid for the remainder of the term.
The discussion around Multiyear Two-Wheeler Insurance Policy
In 2018, as per the ruling of the Supreme Court in India, the Insurance Regulatory and Development Authority of India (IRDAI) directed all non-life insurers to offer three-year insurance covers for new four-wheelers and five-year third-party covers for two-wheelers. This mandate was issued, keeping in mind that nearly 75% of bikes on Indian road plied without a valid insurance policy. The two insurance cover options provided were:
- a multiyear insurance cover with both third-party and own-damage insurance for three and five years.
- a comprehensive cover offering five-year and three-year third-party insurance and a one-year own-damage cover.
However, according to IRDAI, these long-term insurance covers became a pricing challenge for insurers, especially with regard to own-damage. The bundled package offering third-party and own-damage covers for three and five years were becoming unaffordable for a lot of vehicle owners.
Also, making the bundled insurance packages compulsory not only limited the options of policyholders wanting to switch to new insurance providers but also gave rise to the possibility of forced selling of insurance covers. As a result, policyholders could face the problem of being burdened with a long-term insurance plan without any product flexibility.
Lastly, the coronavirus pandemic and the subsequent lockdown in 2020 had already caused car sales to crash, which also resulted in lower motor insurance penetration. The compulsory long-term insurance policy further deterred potential customers from purchasing new vehicles.
Therefore, in 2020, due to the above reasons, the IRDAI decided to withdraw the long-term package policy.
While bikes are a very convenient mode of transport, there are also considerably higher instances of two-wheeler road mishaps in India. It is always wise to be a cautious rider on the roads and protect your precious bike and yourself with a multiyear bike insurance policy.