Top 10 Important Bike Insurance Terms You Should Know
It is mandatory under the law that you must have at least a third-party bike insurance policy in order to legally drive on Indian roads. When you buy the bike, the company offers you a bike insurance policy from their associate insurance company. In most cases, we do not think before choosing that very company suggested by the showroom. However, if you know a little bit about the bike insurance policies, you can choose the best comprehensive policy to ensure complete coverage.
There any many technical terms in the insurance world that may confuse you. It is essential to have some knowledge of this technical jargon to ensure that you buy the right policy. If you know these terms it becomes easier to understand their terms and the claim process looks simpler as well. Here is a list of the most common terms used in the insurance world.
- Cover: It is a term used by the insurance companies that refers to the liability to pay you the claim amount as per their regulations. The details of the claim are included in the insurance policy documents that you get at the time of purchase. The cover amount depends on several factors that are determined by the insurance company at the time of processing the claim.
- Parties in an insurance policy: There are three parties in a bike insurance policy as follows:
- First Party: The insured person and the bike are the first parties in a bike insurance policy. When the insurance company refers to First Party anywhere in the documents, they are referring you and the bike.
- Second Party: The insurance company that is providing the cover is the second party in an insurance policy.
- Third Party: In an insurance policy, the Third Party refers to the person or the property who is involved in an accident caused by the first party.
- Premium: In order to purchase or renew a bike insurance policy you pay the insurance company a certain amount every year. The bike insurance policy is valid for a fixed term which is one year in most of the cases. This amount that you have to pay is called premium. The insurance company considers several factors like model, make, modifications and more while calculating the premium.
- Insured Declared Value: IDV or Insured Declared Value is the market value of your bike. The insurance company determines IDV every year at the time of renewal. It is a known fact that the market value of your bike will reduce with time. IDV makes it possible for the insurance company to reduce the maximum payable amount to the insured person in case of any damage or loss of the bike.
- Zero Depreciation Cover: It is an add-on that you can buy with your insurance policy. This add-on ensures that IDV is not applicable at the time of claim settlement. That means the company will not deduct the value of the parts based on depreciation. It ensures a higher claim amount at the time of settlement. Zero Depreciation Cover is only available for bikes up to 5 years old.
- No Claim Bonus (NCB): If you do not file a claim in a specific year, the insurance companies will provide a discount on the premium that you have to pay at the time of renewal. This discount is known as No Claim Bonus. Please note that if you transfer your insurance policy from one insurance company to another, NCB will be applicable to the new insurer as well.
- Third-party Cover: If you meet with an accident and the fault is on your side, then you are legally and monetarily liable to pay compensation to the third party. It is mandatory under law to have at least a third-party cover if you want to drive a bike on Indian roads. It covers vehicle, property, injuries, and death of the third party.
- Comprehensive Cover: Though law only mandates to get third-party cover, it is advised that you should go for comprehensive cover. It provides financial assistance for the repair cost of your own vehicle as well. It also provides cover in case of damage due to natural disasters or theft. If you need medical assistance because of the accident you were involved in, it will also cover the medical bills.
- Exclusion: There are some risks that a comprehensive bike insurance policy does not cover. These risks are not common for everyone. They are known as exclusions. For example, if you get modifications done on your bike, comprehensive insurance cover will not provide assistance in case of damage. It can be covered with the help of an add-on.
- Personal Accident Cover: It is an add-on that you can buy to get financial assistance in case of injuries or death. In case of demise, the insurance company will pay a lump sum amount to your family.
Understanding basic terms associated with bike insurance policy makes it easier for you to make a wise decision while choosing the best policy. It also makes it easier to file a claim.