One of the first things that bike owners look at while buying a bike insurance policy is the premium. It is usually the deciding factor between policies. However, how does the insurer calculate the bike insurance premium? Did you know that two different people with the same two-wheeler purchased on the same day from the same dealer, can pay different premium amounts for the same insurance policy?
Almost all insurance companies offer an online bike insurance premium calculator to help you get a quote online and decide if you want to buy the policy or not. While you can use it to make a decision, today, we will talk about how an insurer calculates your bike insurance premium so that you understand the factors that impact the calculation.
There are two types of bike insurance policies in India:
- Third-party insurance – mandatory for all bike owners
- Comprehensive insurance – optional
How is the Third-Party Two-Wheeler Insurance Premium Calculated in India?
Since third-party insurance is mandatory in India, the Insurance Regulatory and Development Authority of India (IRDAI) regulates the premium rates for third-party bike insurance policies. The IRDAI announces the third-party insurance premium prices for both bike insurance and car insurance on an annual basis.
The current slabs are as follows:
| The cubic capacity of the two-wheeler | Premium rates (Rs.) |
| Less than 75 cc | 482 |
| Greater than 75 cc but less than 150 cc | 752 |
| Greater than 150 cc but less than 350 cc | 1193 |
| Greater than 350 cc | 2323 |
Taking into consideration the ensuing pandemic and the resultant financial crunch among the general populace, the IRDAI has cancelled the premium rate hike for third-party policies for 2020-21.
How is the Comprehensive Two-Wheeler Insurance Premium Calculated?
Usually, bike owners use a bike insurance calculator to determine the premium of the comprehensive two-wheeler policy that they plan to buy. This is more complicated than the third-party premium calculation since there are multiple factors involved. Here are some important factors that the insurance company considers to calculate the premium:
1. Make & Model of your two-wheeler
If you are purchasing a high-end bike, then its price will be high, and hence, the sum assured will be high too. Therefore, the insurance company will need to charge a higher premium.
2. Year of manufacture of the bike
As the age of the two-wheeler increases, its Insured Declared Value (IDV) decreases. Hence, older bikes have lower IDVs. IDV is directly proportional to the premium of the policy. Hence, older bikes will have a lower premium rate than newer bikes.
3. Cubic Capacity of the two-wheeler
A comprehensive bike insurance policy also considers the capacity of the engine of your two-wheeler while calculating the premium. Like a third-party policy, a higher engine capacity means a higher premium.
4. Your personal details
The insurance company takes your personal details like your age, gender, experience in riding a bike, and other factors to calculate the premium. Inexperienced riders are usually charged a higher premium than experienced ones.
5. No Claim Bonus (NCB)
When you renew your policy, all insurance companies offer a discount on premium called the No Claim Bonus if you haven’t filed a claim in the previous policy term. This is a progressive discount that starts at 20% of the premium amount for the first claim-free year and grows up to 50% if you don’t file a claim for five consecutive policy terms. This plays a huge role in determining the premium rate for your bike insurance policy.
6. Voluntary Deductible
A deductible is an amount that you pay at the time of claim settlement. There is a compulsory deductible that is mandated by the IRDAI and a voluntary deductible that you can opt for to bring the premium rate down. If you choose to opt for it, then your premium amount will reduce but your liability at the time of repairs will increase.
7. Add-ons
All comprehensive two-wheeler insurance policies offer a range of add-ons to choose from to expand the coverage and customize the policy to your requirements. These include a zero depreciation cover, return to invoice cover, consumable expenses cover, engine protect, roadside assistance cover, etc.
8. Safety measures (equipment)
Insurers offer benefits in two-wheeler insurance premium rates to bike owners who install safety equipment on their vehicles like an anti-theft alarm, etc. It is usually offered if the equipment belongs to the list of safety equipment authorized by the Automotive Research Association of India (ARAI).
Summing Up
The online bike insurance calculator offered by insurance companies is the easiest way to determine the premium rate of your policy. This comes handy when you are comparing insurance companies and are looking for the most cost-efficient option. Understanding the factors that influence the premium calculation, you can adjust the variable factors like voluntary deductible, add-ons, etc. to get the maximum value for your money.
Remember, a bike insurance policy can protect you from heavy losses in the unfortunate event of damages or losses caused to you, your bike, third-party property or person due to an accident or collision. Research well and choose the best protection for your beloved two-wheeled friend. Good Luck!
