How Insurance Sector Faces Initial Hiccups Post GST on Two Wheeler?

While India is in the grasp of GST fever, most of the people find some of its promises compelling. As GST tends to influence every aspect of our lives, the insurance sector is no exception. The imminent execution of GST would definitely hold an influence on one’s financial planning, albeit slightly. As per the new announcement made by the Finance Minister, 3% hike on insurance premium is applied, i.e. from 15% to 18%, which indicates a prominent hike in the insurance services and products. This hike is applicable to all insurance products be it Life or General Insurance.

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Now, you must be thinking what if you own two wheeler insurance or planning to buy one? Well, general insurance is also no exception similar to life insurance. Service tax has been increased by 3%, which means 18% GST will be applicable to general insurance products, including two-wheeler insurance, car insurance, health insurance, travel insurance etc. Let’s have a detailed glance

GST and Insurance

The overall influence of GST on insurance is not huge. However, both the existing and new policyholders will still suffer from additional policy cost. If you are paying Rs. 10,000 as your term insurance premium, the GST rate will increase the premium by up to 3000. When buying a term plan or comparing multiple ones, ensure that you are comparing premiums, including or excluding GST for all the insurance companies. The selection policy will be the same for all and try to stick to a proper selection process when finding the right deal.

Again, the same percentage will be applicable to general insurance products. So, if you are planning to buy a two-wheeler or car insurance, your premium will be higher after applying 18% of GST rate as tax. While comparing the plans, just in case, you are buying two-wheeler, using Bike Insurance Calculator and by applying GST rate, you can calculate the premiums offered by various insurers and find the best deal for you, However, bear in mind, by any means, insurance rate will be higher than the that of the previous year.

Note: Do not look for the lesser premium as the key deciding factor. Look for the extent of coverage offered by each policy.

Overall Implication of GST Rates: An Analysis

GST Rates: Before & After: New Rates Applicable for Insurance Plans After GST is announced

GST Rates: Before & After: New Rates Applicable for Insurance Plans After GST is Announced

Insurance Product

Before GST

After GST


Premium of Term Insurance



Applicable on entire premium

Unit Linked Insurance Plan (ULIP)



Applicable on premium minus investment amount

Premium of Car Insurance



Applicable on entire premium

Riders Premium



Applicable on entire premium

Endowment: Year-1 Premium



On 25% of premium

Endowment: Renewed Premium



On  12.5 % of premium

Pension: Single Premium




Things to Keep in Mind While Buying Two Wheeler Insurance

When you purchase a new bike, there is a range of factors that you tend to consider, such as starting from the look, model, brand, price etc. Insuring your vehicle either comes in the end or you simply ignore it. Thanks to the Govt., third-party liability insurance is mandatory in India. However, it doesn’t mean that you pick any options randomly, which your insurance agent offers without knowing the basic pointers of coverage. Here are some key pointers one must consider when buying a two-wheeler insurance plan, whether online or offline.

GST Impact on Two Wheeler Iinsurance

Type of Coverage

You should be aware of the types of bike insurance plans available in the market. They, generally, are of two types:

    • Third-party Liability Cover or Act-only Plan: It is an obligatory cover, which protects you in the event of any liability arising from third-party property damage, bodily injury, or accidental death.
    • Comprehensive Plan: It covers own damages and above liability cover. Natural and man-made damages are covered by the plan. As the name suggests, it is quite expensive than the earlier one and it is also optional too.

Other Coverage Types

Apart from above-mentioned coverage, there are insurance coverage types for the pillion rider, collision cover, accidental death cover, fire, theft and vandalism cover, etc. You can buy a comprehensive cover with a blend of all these riders.

Uninsured Motorist Cover

Despite third-party insurance cover is a mandatory cover, many people ride their bikes without an insurance plan. It is kind of a necessity that people ignore and end up paying severely for it. When you meet with an accident with an uninsured driver, you wouldn’t be getting any claim and have to bear the complete repairing expense. In this case, an uninsured motorist cover will save you from being bankrupt.

Factors Determining Your Bike Insurance Premium

Your bike insurance premium is determined by a few factors, including:

  • Model of your bike: The more expensive the bike, the higher the premium you pay. So, it is important to decide the model while purchasing. Try to be within your budget.
  • City of Purchase: The city you bought your bike from plays an important role in deciding your bike insurance premium. In insurance terms, there are two zones comprising cities, Zone A consists of Delhi, Bangalore, Hyderabad, Chennai, Ahmadabad, Pune, Kolkata and Mumbai while Zone B includes all the rest. The premium for zone A is higher than the premium for Zone
  • Age of the Policyholder: An experienced an old driver may seem more responsible and less risky than a younger driver in the eyes of insurers. So, the premium for the former is as compared to that for the latter.
You may like to Read: Tips To Save Your Bike Insurance Premium

No Claim Bonus

NCB is a bonus that you get for each claim-free year or you are entitled to get a discount on the premium on policy renewal. No Claim Bonus ranges from 20% to a maximum of 50%. You can transfer your NCB along with your insurance policy to another insurer if you change your insurer on policy renewal.

Insured Declared Value

In simple terms, IDV is the actual market value of your vehicle. It is a fixed amount during the tenure of your motor insurance policy. IDV is calculated as per the manufacturers’ listed selling rate after adjusting the depreciated value of your bike, based on how old your vehicle is.

GST: After Effects

Our family is always our first priority. It is even more sensitive when you are the sole earner in your family. Owning a vehicle means a lot to a middle-class family and you do whatever is possible to protect this prized possession of yours. These policies provide financial assistance and compensate you whenever required. At times, it provides financial cover to your family at your unfortunate demise so that they can look after themselves in your absence.

Nevertheless to say, after GST, the entire insurance sector sees a hike in insurance premium. GST is the most talked about the move of Modi Govt. after demonetization. The 3% hike will definitely influence your financial planning.

We can suggest, whenever you look forward to purchasing a motorcycle insurance plan, consider the variants of the insurance policy, including the features and benefits offered, premium rate, what all is covered and what is not terms and conditions, the sum assured etc. Bear in mind that premium is not the only factor to be emphasized upon when taking or rejecting a plan. So, since with GST, the premium goes a little up, don’t ignore the other alluring factors that also come with an insurance plan, which protect you financially.

We guess you won’t mind paying a little higher amount to get covered with huge financial protection. Otherwise, you might end up depriving your family of the basic financial needs in case of your sudden demise, total or partial disability, or terminal illness.

We must say, with the rise of premium, a wave has triggered in the financial market and cutthroat competition is visible between insurance companies to prove their services and products superior. Every company has joined the race by promoting its products in an extended manner. So, we should be careful while taking any plan. Comparative research is hereby mandatory to crack the best deal. Shop around, compare the plans and their offerings online, and then only buy a plan for you and your family. If you’re up to purchase bike insurance, compare the premium rates using bike insurance calculator online.

You may like to Read: Impact of GST on Two Wheeler Insurance Market

Wrapping it up!

Although the hike is apparent, the rise in the outflow could be something that might influence many policy owners. Let’s say if someone is paying car, two-wheeler, health insurance premium, somewhere around 50,000 annually, they could see a jump in premium outflow by Rs. 1,500 a year, where they are not getting any additional risk coverage or policy benefits. Though the initial stages will witness some challenges, it is one of the most important reforms that will surely bring efficiency in the Indian economy. It is the game-changer in tax reforms that have been implemented. However, the actual effects could be seen in a year or more.

For an insurance investor or policyholder, there is not much change, except the basic norms that they follow. We are not judging anyone on any ground and leaving it on time!

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

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^The renewal of insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for a transaction may vary subject to additional data requirements and operational processes.

^The buying of Insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for transaction may vary subject to additional data requirements and operational processes.

#Savings are based on the comparison between highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*TP price for less than 75 CC two-wheelers. All savings are provided by insurers as per IRDAI-approved insurance plan. Standard T&C apply.

*Rs 538/- per annum is the price for third party motor insurance for two wheelers of not more than 75cc (non-commercial and non-electric)

#Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*₹ 1.5 is the Comprehensive premium for a 2015 TVS XL Super 70cc, MH02(Mumbai) RTO with an IDV of ₹5,895 and NCB at 50%.

*Rs 457/- per annum (1.3/day) is the price for the third-party motor insurance for private electric two-wheelers of not more than 3KW (non-commercial). Premium is payable on an annual basis