(Contributed post for our Indian readers)
Buying a motorcycle is a life goal that each one of us wishes to achieve one day. For many, it may mean months of saving money and a loan on top of their heads. Whether you already own a motorcycle or not, it can be a costly investment and protecting it from any harm is paramount. The only way you can keep your bike safe from any physical damage and yourself from a financial dent is by getting it insured.
For Indians, not buying an insurance policy for their motorcycle isn’t an option. As per law, every motor vehicle plying on Indian roads should have valid motor insurance. As you set off on the mission to choose the best insurance for your motorcycle, you may get confused with the immense variety of policies available with different providers. To add to your woes, you’ll come across a lot of technical jargons and terminology which may make no sense to you.
In order to choose the right policy, you need to be aware of some of the motorcycle insurance terms which may help you save money on your premiums. You don’t have to go anywhere. We have simplified some of the most important motor insurance terms that will help you make a sound decision while buying an insurance policy.
1. Insured Declared Value (IDV)
The most common motor insurance term is Insured Declared Value or IDV. It refers to the current market price of the motorcycle to be insured. It is the maximum amount that you can expect to get from your insurance provider in case of a total damage claim. The total damage refers to the situation in which your bike has been stolen or damaged beyond repair. The age of your motorcycle helps to estimate its current IDV. If you deduct your bike’s depreciation due to age from the current selling price of your motorcycle by the manufacturer, you get your IDV.
It is important for you to understand the concept of IDV since it is directly proportional to the premium you pay. More the IDV amount, more the premium you pay. However, if you quote a lesser IDV amount than the actual current price, you might end up paying more than you should be in case your motorcycle is damaged/ stolen.
2. Own Damage Premium
At the time of buying motor insurance, you will often come across the term ‘Own Damage Premium’. Well, own damage premium is a part of your total insurance premium that covers your motorbike against any damage caused by factors beyond your control. Such factors may include natural calamities like earthquakes, floods, cyclone, etc along with manmade disasters like fire, bomb explosions, etc. Therefore, own damage premium is the part of your premium amount that you pay to ensure that your bike is covered against damage caused by natural calamities as well as manmade disasters.
Opting for Own Damage Premium helps you to obtain motor insurance cover equal to the Insured Declared Value. The own damage premium amount is estimated on the basis of your bike’s IDV, model, cubic capacity, etc along with the geographical location where you reside.
3. Third Party Liability Cover
An insurance policy also provides coverage to the damages caused to a third party if the insured is the at-fault driver. Third party liability coverage provides protection against any legal/ financial liability that may arise if you cause death/ injury or damage to another person or property while driving. Your insurance provider will compensate for the third party’s financial loss on your behalf. In India, third party liability cover is a compulsory coverage for all motorcycle owners under their motor insurance policy by law.
4. Personal Accident Cover
Besides the insured bike and the third party, an accident may also cause serious injuries to the insured person. In several cases, the accident can be fatal or may lead to permanent disability. As per the National Crime Records Bureau, 16 people die of roads accidents every hour and in 2013, more than 1,37,000 people were killed in road accidents. In such unforeseen incidents, personal accident cover of your motor insurance offers financial protection to the insured or his family by providing compensation. Since it is an additional rider benefit, opting for a personal accident cover will increase your insurance premium.
5. Zero Depreciation Cover
All motor insurance policies account for depreciation of replaced parts while estimating the sum insured amount. Zero depreciation cover is an add-on feature that can help you obtain a higher sum insured by eliminating deductions against the depreciation of replaced parts. However, zero depreciation cover attracts higher insurance premiums. Nonetheless, it is advisable to opt for zero depreciation cover as it can be availed only during the first few claims of your motor insurance policies.
6. No Claim Bonus (NCB)
Another important motor insurance term you may come across is No Claim Bonus (NCB). No claim bonus is a bonus discount that you receive if you don’t make any claim in the previous policy year. It is a discount that you get on your renewal premium for every claim-free year. The best part is that NCB is cumulative and can increase up to 50% if no claim is made. Thus, you can save a lot of money on your renewal premium with no claim bonus. Moreover, it can also be transferred to a different provider if you change your insurance company during policy renewal.
So there you go. Now that you know some of the most common and crucial motor insurance terms, you can choose the coverage extent and the premium amount of your choice. You can choose motor insurance wisely as you know what are you paying for and where can you save money.