Taking Cover. Riding on a long-term cover

If you own a bike, it is time you considered a long-term insurance for your pet vehicle. A long-term policy offers the same protection and benefits that are available for the single year two-wheeler insurance policy. But a policy tenure of two or three years saves you the hassle of remembering to renew the policy every year.

Besides, long-term policies also score over single-year policies on issues such as premium and no claim bonus.

Players such as Bajaj Alliance, HDFC ERGO, ICICI Lombard, New India Assurance and TATA AIG offer this plan, besides the one-year policy.

However, some of them do not offer add-on covers for the two and three-year options. Here’s what you should know about long-term bike insurance:

Choosing a long-term two-wheeler insurance policy helps the buyer save close to 10-25 per cent in the premium payable compared to a single-year policy.

Under the long-term policy, the premium is fixed for the full policy period while there is an incremental increase in the renewal premium under the single-year policy (about 10-25 per cent every year).

This is because, every year, the watchdog, Insurance Regulatory and Development Authority (IRDA), revises third-party premium rates based on past facts and figures, considering the number of claims made, loss ratios for insurers, inflation, etc. For the financial year 2016-17, the IRDA has revised third-party premium for two-wheelers of engine capacity not exceeding 75 cc from ₹519 to ₹569 and for two-wheelers of engine capacity 75-150 cc from ₹538 to ₹619. Similarly, for engine capacity 150-350 cc, the premium was revised from ₹554 to ₹693.

Going by the current revision, the basic premium for the liability only insurance for a three-year policy for two-wheelers with engine capacity of 150-350 cc is ₹2,079 as against ₹693 for single-year policy (excluding service tax).

Assuming that the incremental increase in the single-year premium is 25 per cent every year, single-year policy holders would have ended up paying ₹2,642 for the three-year period.

Hence, by opting for a long-term policy, the policy holder can save ₹563 on the premium.

With the long-term two-wheeler insurance being valid for up to three years, one does not have to undergo the trouble of having to renew the policy promptly every year.

Besides, the long-term policy saves you from the risks of non-renewal in case you fail to remember the due date each year. Further, the long-term policy holder is spared from the hassle of his vehicle being inspected by the insurance company every year on renewal.

Under the comprehensive long-term two-wheeler policy, you can get all the benefits as mentioned in your policy documents such as cover for all the losses, repairs as well as for any damage caused to third-party by your two-wheeler for the full tenure.

No claim bonus (NCB) is a discount provided by the insurance companies on the renewal premium based on the claim made in the past.

Post-completion of the policy tenure, many insurance companies award incremental NCB on renewal, subject to each claim free year.

Under the single-year policy, you lose the NCB once you make claim.

In the case of a long-term insurance policy, insurance companies provide the benefit of NCB even when you make a claim, subject to the number of claims made during the policy period.

Mostly, NCB entitlement will be nil if you made more than two and three claims during the policy period for the two year and three year policies respectively. Insurance companies pass the cut in the administrative and policy-issuing costs under long-term policies to the policy holders in the form of a discount. However, practices vary among the insurers.

Many insurance companies that offer long-term insurance policies do not offer all add-on covers that are available for single-year policies. Add-on covers or riders are optional, provided for an additional premium along with the base insurance policy.

Some of the add-ons are emergency assistance, zero depreciation cover, and so on.

Secondly, we cannot always assume that IRDA would revise premium rates upwards year after year.

In its recent revision, IRDA has reduced the third-party premium rate by 10 per cent, that is, from ₹884 to ₹796 for two wheelers with engine capacity of over 350 cc.

It is possible that the regulator reduces the premium rates for engine capacity below 350 cc as well.

Therefore, locking in for three years with long-term policies may not be a wise idea as the policy holder may miss out on such opportunities.

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