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Buying Two-Wheeler Insurance? Here are the IRDA Rules for Two-Wheeler Insurance Policies You Ought to Know

It is important to have a regulatory body which keeps a check on the insurance plans to ensure that insurance buyers are not cheated in any way. The IRDA i.e. Insurance Regulatory and Development Authority of India is the topmost authority in India for the insurance sector. When it comes to two wheeler insurance policies, IRDA has set some guidelines so that insurance providers are fair to the policyholders.

The primary purpose of these rules and regulations is the protection of the policyholders. All the insurance providers need to follow these guidelines, and IRDA supervises the healthy growth of the insurance sector in India. Here are the guidelines for the two-wheeler insurance policies. Read on to know about them:

Rules set by IRDA for Two-Wheeler Insurance Policies

The two-wheelers that come under the umbrella of two-wheeler policy are basically scooters, motorcycles, and scooties.

The Type of Covered Incidents

As per the IRDA guidelines, comprehensive two-wheeler insurance policies are not eligible for compensation under the following situations:

  • Loss to the vehicle because of housebreaking, burglary or theft.
  • Destruction caused to the vehicle in the unfortunate case of a strike as well as riots.
  • Destruction caused to the vehicle due to inflammation, fire explosion or lightning.
  • Destruction caused to the vehicle by shock or fire damage in the case of an earthquake.
  • Loss to the vehicle or its parts in the case of an external accident.
  • Loss caused due to a terrorist activity.
  • Destruction caused to the vehicle due to a malicious act, radioactivity or nuclear explosion.
  • Loss to the two-wheeler caused while it is in transit by an external mode of transport- waterway, air or elevator or road rail inland.
  • Destruction caused due to the two-wheeler in case of a natural disaster such as a flood, typhoon, hurricane, etc.

Note- These exceptions are a part of every basic two-wheeler insurance policy. Insurance experts recommend going through the fine print of the policy copy so that you are not caught in a situation where your insurance claim is rejected.

Deduction or Depreciation Rate

The deduction rate or the depreciation rate is also clearly mentioned in the IRDA guidelines. It depends on the age of the vehicle as well as a few other factors. The depreciation rate depending upon the parts as follows:

  • For fibreglass components as mentioned in the two-wheeler insurance policy, the rate is 30%.
  • For parts made up of rubber, nylon or the tubes, batteries, plastic parts as well as tyres, the deduction rate is 50%.
  • No deduction rate is mentioned for glass parts.

There is also an entire section for the rate of depreciation pertaining to paint. You can find this in the guidelines mentioned in your policy document. 

Insured Declared Value

Insured Declared Value (IDV) plays a very crucial role when it comes to deciding the premium for your two wheeler insurance policy. On the basis of that, the sum insured is fixed. The IDV is evaluated depending upon the market value i.e. the selling price of the two-wheeler brand. Apart from that, the costs of side accessories and other parts are considered.

Here are other essential pointers to remember:

The rate of depreciation applies to the insured declared value as well. It depends upon the age of the vehicle. The IDV is extremely crucial because it is also treated as the main price in calculating the total loss.

Schedule of Depreciation for Insured Declared Value

The schedule of depreciation for a two wheeler insurance policy depends upon the age of the vehicle. The depreciation percentage starts with a slab of six months to ten years. However, there are other important things to remember regarding this point as well.

Note- The insured declared value for vehicles that are above five years old or the model that you own has been discontinued is decided on the terms of understanding between the issuer of the policy as well as the policyholder.

Other Rules Depending upon Specific Situations in case of an Accident

The IRDA has an elaborate set of regulatory guidelines regarding the following situations:

  • When the third-party is liable
  • Limits of indemnity
  • Specific terms which need to be avoided
  • The right of recovery
  • Rules related to different types of add-on covers

Cover for Personal Accident

Your two-wheeler insurance policy will explicitly mention the exceptions as per the IRDA guidelines. The general ones that are set by the IRDA in case of a personal accident are:

  • The company has to indemnify the policyholder as per the pre-decided amount insured and depending on the severity of the bodily injury the holder has suffered.
  • The scale of compensation for death is 100% unless some specific terms and conditions in the policy document aren’t met.
  • The scale of compensation is 100% when the policyholder loses both limbs or in the case when there is a loss of one limb, as well as one eye.
  • In case, the policyholder loses one eye or one limb, then the compensation for the same is 50%.
  • If there is any bodily injury other than the ones mentioned above that cause complete disablement of the policyholder, then the compensation amount for the same is 100%.

However, there are specific terms and conditions which apply to this particular compensation clause as well:

  • There are four different situations mentioned above. However, at one time, the claim can only be filed for any one of the conditions.
  • The total liability of the company cannot be more than Rs. 1 Lakh at one time of processing the claim.
  • The policyholder is not eligible to file a claim if the accident is a result of self-harm, attempted suicide, infirmity or even a physical defect.
  • The policyholder is not eligible to file a claim if the accident is categorized as DUI, which is driving under the influence of either drugs or alcohol.
  • The sum assured payable to the registered nominees or the legal representatives of the policyholder or the insured.
  • The coverage is provided in case the owner/driver holds a valid driving license.

Other General Exceptions

Here are other exceptions which are a part of the IRDA guidelines set for the two-wheeler insurance policy:

  • The insurance provider is not responsible for paying the claim if the insured vehicle meets with an accident out of the covered geographical area.
  • The insurance provider would not process the claim if the vehicle is used above its limitations.
  • If the name of the driver on the drivers’ license and the claim form do not match, the claim won’t be processed.
  • The insurance provider is not liable in the case of damage caused by insured two-wheeler to any property.

Other Conditions

  • When an accident occurs, you need to intimate the insurance company as soon as possible. The insured (if in the condition or his/her legal representative) will need to provide all the required information.
  • In case of a criminal act or theft, the insured needs to inform the police as well and then intimate the insurance company.
  • The losses incurred will not exceed:
    The total loss of the vehicle will be payable as per the IDV of the vehicle.
  • The total loss or the partial loss provided on the basis of the scheduled mentioned as per depreciation.

There can be times when the conditions specified in the IRDA guidelines can be confusing to a layman. However, it is important to read the policy copy and go through the applicable terms and conditions of the two-wheeler insurance policy.

Best Two-Wheeler Insurance Policies

The best two-wheeler insurance policies to consider when you buy a two-wheeler vehicle are:

  1. Bajaj Allianz Two-Wheeler Insurance
  2. HDFC Ergo Two-Wheeler Insurance
  3. IFFCO Tokio Two-Wheeler Insurance
  4. Bharti AXA Two-Wheeler Insurance
  5. New India Assurance Two-Wheeler Insurance

Additional Points to remember

The insurer needs to follow the guidelines set by the IRDA in order to be fair to the insurance buyers. While buying a policy, you can check its authenticity by going through its terms and conditions.

In a Nutshell

As a two wheeler insurance policy buyer, you ought to know these guidelines. While the guidelines mentioned above are a general set of guidelines, you should also check the policy document of the policy. It will help you to find out about the applicable terms and conditions. It is always wise to know about the rules and regulations of the policy so that the policy issuer does not take you for a ride.

The terms and conditions mentioned above are formulated for policy buyer’s protection. They will come handy when they need to file the bike insurance claim.