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IRDA Rules for Two-Wheeler Insurance Policies You Ought to Know

Having a supreme authority is essential to keep an eye on every insurance deal and to ensure that the policyholder is being treated in the right way. In this regard, IRDA or Insurance Regulatory and Development Authority of India is the highest authority that looks after the insurance related rules and regulations. Starting from introducing new rules to deciding the premiums (for a specific kind of insurance), IRDA makes sure that every customer is provided with the right information.

Why Does it Require?

The purpose of introducing these rules and regulation is to maintain a smooth rapport between the insurance provider and the insurance users. Insurance is a contract which expects to be fair from the both sides. The insured is advised to follow these guidelines at the time of buying a policy to avoid future consequences. Given that, if you’ve bought a two wheeler and new to the insurance world, this guidelines will help you make the journey pleasant.

Basic IRDA Guidelines for Two-Wheeler Insurance Policies

The two wheelers usually include- scooters, motorcycles, and scooties, where the type of coverage offered includes:

  • Third Party Liability Insurance
  • Comprehensive Insurance

The Type of Coverage

As per the IRDA guidelines, comprehensive two-wheeler insurance policy covers the insured vehicle under below circumstances:

  • Loss or damage to the insured vehicle due to man-made disasters such as burglary or theft, riot, strike etc.
  • Damage or loss due to natural calamities such as fire, explosion lightning, inflammation, earthquake, flood, storm, hurricane and so on
  • Damage to the vehicle in case of external accident
  • Third party liabilities arising out of accidental damage, injury or death
  • Personal accident cover up to Rs. 15 lakh for multiple vehicles

Policy Exclusions

 As per the IRDA norms, comprehensive insurance policy doesn’t cover the following conditions:

  • Consequentialloss, normal wear & tear, damage due to age, mechanical break down
  • Damage to bike tyres and tubes. Some insurers offer 50% of the total cost in case of replacement
  • Loss of accessories due to burglary or housebreaking, unless the insured vehicle is stolen at the same time
  • In case of an accident if the driver is not carrying a valid license
  • Accident happens while driving under the influence of alcohol or other intoxicating substances
  • Any loss sustained outside the geographical area is not covered
  • Any claim arising for contractual liability

Note- These exceptions are a part of every basic two-wheeler insurance policy. It is highly recommended to go through the policy fine print thoroughly to avoid any consequences at the time of claiming your bike insurance policy or to avoid claim rejection.

Depreciation Rules

IRDA also has some set rules for calculating depreciation, which are mentioned in the RDA guidelines. The percentage of depreciation applied in the various parts is as below 

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

For the complete list, please refer to your policy document and the guidelines given.

Insured Declared Value

Insured Declared Value (IDV) plays a very crucial role when it comes to deciding the premium for two wheeler insurance policy. IDV is the current market value of the vehicle, basis of which the sum insured is fixed. 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.

The deprecation applicable as per the age of the vehicle is:

Age

Percentage

up to 6 months

5%

6 months to 1 year

15%

1 to 2 years

20%

2-3 years

30%

3-4 years

40%

4-5 years

50%

Note- The insured declared value for vehicles that are above five years old or the model that you own has been discontinued is decided based on the mutual agreement 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

Personal Accident Cover or Owner Driver

As per the latest amendment by IRDA, the limit of mandatory personal accident cover for two wheeler insurance is raised to Rs. 15 lakh. It can be availed against an annual premium of Rs. 750. The new rules will be applicable for both comprehensive and third party liability cover. The policy covers the owner driver for accidental death, p permanent total disability, permanent partial disability and temporary total disability due to an accident. The policy works on the basic principles like:

  • In case of an accident the insurance provider indemnifies the insured as per the pre-decided amount 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 insured loses one eye or one limb, the insurer will compensate for the same up to 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 to be applied while settling a claim:

There are four different situations mentioned above. However, one can claim for only one condition at a time

  • The total liability of the company cannot be more than Rs. 15 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 will be rejected

How to be Proactive in Case of an Accident

  • 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 register a claim thereafter
  • In case of theft or complete damage the insured will be compensated up to the full value of the vehicle
  • In case of partial damage, the compensation is done up to the IDV of the vehicle. With a zero depreciation add-on, you can claim up to the full value even the vehicle is damaged partially

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:

  • Bajaj Allianz Two-Wheeler Insurance
  • HDFC Ergo Two-Wheeler Insurance
  • IFFCO Tokio Two-Wheeler Insurance
  • Bharti AXA Two-Wheeler Insurance
  • 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 get familiar with the 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 keeping the safety of the insured in mind. They will come handy when a claim arises and the insured experiences a settlement without a hassle.

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