Is Three-Year Insurance Cover for Two-Wheelers Beneficial?
In a country like India, 75% of two-wheeler owners don’t have any motor insurance cover. Despite two-wheeler insurance being mandatory, the hiked number of the uninsured automobile on the roads has become a serious concern. People either don’t buy automobile cover in the first place or even if they do, they don’t renew it from time to time.
In order to tackle this issue, the Insurance Regulatory Development Authority (IRDA) has given a green signal to long-year motor insurance policies. Over the past few years, as high as six general insurance corporations have launched long-term insurance policies for bikes. This helps to address the problem of non-renewal of motor insurance policies.
Gone are the days when you used to take help of the insurance agents in order to renew your policy. Nowadays, insurance corporations have become techno-savvy. This has enabled them to deliver long-term two-wheeler insurance plans directly through the website and mobile apps that ensure transparency in the transactions.
On the bright side, there is a hike in the demand for long-term motor insurance policies. Hopefully, the day is not far when more and more of automobile owners will go for long-term insurance plans.
The Perks of Long-Term Policies:
There are various benefits and perks to buying three-year two-wheeler insurance. They are:
One of the major benefits of these policies is that they save you from the pain of yearly renewals, as you don’t have to renew your two-wheeler insurance policy every year. As of now, this plan is available only for 3 years.
You are Able to Save More
The premium for the third-party liability is frozen at the start of the first year; you get to save on the premium. As a result of inflation, the policy premiums are hiked up to 20 per cent annually. A long-term insurance plan immune you against inflation too. As a result, you get to pay a lower premium for your motor insurance policy.
The calculation of the premium is based on the IDV (insured declared value) of the automobile. This is calculated on the basis of the listed selling price of the model and the brand by the manufacturer of the automobile at the time of policy inception and renewal. As mentioned in a schedule by the IRDA, IDV is adjusted for the depreciation of the automobile; as a result, it is lowered every year. That amount is the highest payable amount when it comes to claims made for stolen automobile or damage caused due to an accident.
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High No Claim Bonus
In a comparison of long-term policies and short-term policies, the former has an edge over later. NCB is a discount provided for next renewal if the policyholder doesn’t make any claims during the previous year.
For example, if you claim 20% NCB at the time of renewal in long-term policy, then 20 per cent of discount will be applicable not for one year, but for three years.
The Drawbacks of Long-Term Policies
Apart from different benefits offered by a multi-year two-wheeler insurance plan, there are certain drawbacks. They are as follows:
No Immunity against Deflation
It is a matter of time when an advantage becomes a disadvantage. Since the premium is frozen at the time of buying or renewing the policy, you will incur some losses if there is deflation and premium rates are reduced. This is because you have paid your premium in advance.
Minor Loss at the Time of Selling Automobile
You have paid your two-wheeler insurance premium in advance.
Let’s assume that during the second year of your insurance, you get a very good deal for your vehicle and you decide to sell it off. You will bear the insurance cost, as you have paid the premium in advance and your buyer will benefit from this.
Should you buy a Long Term Motor Insurance Policy?
The question is, to buy or not to buy. The pros weigh heavier than the cons. Chances are very slim that premium rates will be reduced in the coming future. It is guaranteed that they will increase for sure. If you don’t plan to sell your vehicle and you want to save on the insurance premium rate, then you must go for long-term plans. Remember, the money saved is the money earned.
PS - Long-term plans also save you from the hassle of renewing your policy every year.