What you should know about your bike insurance premium

You pay a bike insurance premium to get your motorcycle insured for any risk against own damage or third-party liability arising out of lawsuits or proceedings at the motor accident claims tribunal. When you buy bike insurance,you must know how an insurance company calculates the premium and how you can make changes to it to ensure that you get the best deal.

1. Third party vs. comprehensive cover: When you purchase a policy, you can opt for either third-party bike insurance, which covers third-party liabilities or a comprehensive policy that covers own damage as well as the third-party liability. The premium of third-party cover is decided by the government and the Insurance Regulatory and Development Authority of India. However, the premium of own damage cover is decided by the insurer. Third-party cover will always be cheaper than comprehensive cover but it will not protect you in case of own damage or theft. In addition, buying long term bike insurance is always a better idea as it relieves you from the hassles of annual renewal.

2. Vehicle Depreciation: As you ride your bike, it undergoes wear and tear. As a result, its market value depreciates. Motor insurance companies have their own methods to calculate depreciation. Remember that the higher your vehicle’s depreciation the lower will be the insurance premium. This works in tandem with the Insured Declared Value of your vehicle.

3. Insured Declared Value: Insured Declared Value or IDV determines the present market value of your vehicle according to the insurance company. It is the maximum amount of money that the insurance company will provide you in case of a claim being made. Your premium is directly calculated as a percentage of your IDV. The good point is that insurance companies also allow you to choose your own IDV which has to be within a specific range of the pre-decided IDV. The more you choose as your IDV, the higher will be your premium and vice versa.

4. No Claims Bonus: To promote safer driving as well as regular insurance renewal, the insurance companies offer a special discount called No Claims Bonus or NCB on the policy premium. This discount starts at 20 per cent for the first claim-free year and goes up to 50 percent if you do not make any claim for five consecutive years. But, for this, you must ensure that the policy is renewed on time and never lapses. Also, NCB is offered only on the own damage premium component. It does not impact the third-party bike insurance premium component, which remains fixed.

5. Accessories and Electronics: When you purchase a bike, you get many accessories with it. These accessories can help in enhancing your riding experience by improving the safety of your bike or by increasing the mechanical and fuel efficiency. Many companies allow you to insure these accessories and electronics at an added cost.

6. Add-ons :Bike insurance companies provide you with many add-ons to your insurance policy to enhance the scope and nature of protection. Common add-ons include nil depreciation cover which allows you to offset the depreciation deduction from the claim amount. Another add-on is the EMI protection cover which takes care of up to three EMIs when your bike is under repair. Other popular add-ons are daily allowance and helmet covers. Keep in mind that these add-ons are charged extra so the more add-ons you choose, the higher will be your bike insurance premium.

7. Voluntary Deductible: Deductible is a percentage claim amount that you have to bear from your own pocket. It is meant to ensure that policyholders do not make frivolous claims and help insurance companies manage claims better. To reward safe bike riders who do not make claims regularly, the insurance companies allow a voluntary deductible which lowers the premium cost at the time of policy purchase. Safe drivers get to enjoy the discount because they do not make frequent claims.In case a claim is made, voluntary deductible becomes a delayed cost.

8. Location of Insurance: Not many people are aware of the fact that the location of the automobile has a direct impact on the cost of the premium. Despite the best efforts by law enforcement officers, there are some areas where vehicle theft and accident rates remain higher than others. Therefore, insurance companies tend to charge a higher premium amount for the vehicles registered in these areas.

9. Online vs. Offline Insurance Purchase: There was a time when most people reached out to an insurance agent who recommended policy options as per the insurance buyer’s requirements and the agent was paid to get the policy on behalf of the buyer. The agent further submitted the payment to the insurance company and got his or her commission from the buyer’s premium amount. However, with increased digitisation, most insurance companies have an online presence and you can directly buy a policy from them online. Buying bike insurance online eliminates the insurance agent’s commission and makes the policy cheaper for the bike owner. This is because insurers can pass on the cost-benefit to the consumers.

Going by the variables discussed above, you can consider factors relevant to you and your riding style. Always aim for the best value bike insurance. A cheap insurance policy may not be the best in terms of coverage. Your insurance policy should serve its purpose and cover you in time of need.