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Posted by Royal Sundaram on 27 Oct 2020
Having a valid insurance policy for your two-wheeler is mandatory by law for as long as you are driving your bike. Most individuals consider it as an extra and unnecessary expense while buying a new bike. On the contrary, two-wheeler insurance can save you a lot of money in case of a mishap. Two-wheeler insurance not only provides you with a financial cover but also offers you mental peace.
There are two types of bike insurances available in India. Read on to understand the details of both.
Types of two-wheeler insurance
Third-party insurance policy
Under the Motor Vehicles Act, 1988, a two-wheeler third-party insurance is a mandatory policy that safeguards your finances in case of an accident.
Inclusions: Accidents resulting in injuries caused to the other person, their vehicle, or property are covered under a third-party insurance policy.
Exclusions: Third-party insurance does not provide cover for the damage caused to your vehicle. Additionally, it also does not offer protection if you were riding your bike without a valid license or under the influence of drugs or alcohol. Moreover, the policy has to be active in order to provide you with financial cover at the time of claim settlement.
A major drawback of this insurance policy is that it only provides the option of adding a personal accident cover to it. This makes it a very basic choice for subscribers and may prove to be detrimental in the long run.
Cost: The Insurance Regulatory and Development Authority of India (IRDAI) fixes the premium rates for such plans ensuring the policy’s affordability. A third-party bike insurance policy is the less expensive choice between the two options, but that is only because it provides very limited coverage. However, a personal accident cover of up to Rs. 15 lakhs is mandatory, as per law.
Package insurance policy
A package insurance policy covers all aspects of insurance for two-wheelers. It is a combination of third-party insurance and own-damage cover.
Inclusions: This plan provides financial coverage against damage caused to another person, vehicle, or property, in addition to providing financial support against any damage caused to your two-wheeler. It offers cover against third-party liability, theft, accidents, sabotage, terrorism, and natural calamities. The legal coverage for death or injury caused by third-party and legal expenses are also included under this insurance policy. Moreover, as per rules, it is compulsory to provide personal accident cover to the driver for up to Rs. 15 lakhs.
The highlight of the package insurance policy is that it allows its subscribers to include many add-ons to the policy. Some of these options are zero depreciation, return to invoice, and the pillion rider. These let you customize the insurance policy as per your needs.
Exclusions: Similar to third-party insurance, a package insurance policy also becomes null under certain circumstances, such as riding without a valid license, driving under the influence of an intoxicating substance, and not having an active policy. Additionally, the insurer can refuse your claim if the bike sustains damages due to normal wear and tear or a mechanical breakdown.
Cost: As package insurance is a combination of third-party insurance and own-damage cover, the premium is also calculated using the same principle. Such plans have two components – the third-party premium (pre-decided by IRDA) and the own-damage premium. The premium is comparatively high, but the driver’s extensive coverage justifies the cost compared to third-party insurance.
Given that having valid two-wheeler insurance is mandatory by law, you must not skip out on it. Choosing the right bike insurance is arguably as important as choosing a bike. Between the two options presented to you, the third-party insurance policy provides the bare necessities, essentially completing the formality of having valid bike insurance at a nominal cost. In comparison, a package bike insurance policy offers financial cover for almost all probable emergencies. While a package insurance policy does have a higher premium cost, it negates its only drawback by providing wholesome policy features.
You must also know that insurance companies always advise their clients to choose an insurance plan based on their requirements and not on what it would cost them.
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