Your guide to a Two Wheeler Insurance premium calculator

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Riding bike is fun.

And before your every next ride, especially, when you are in hurry, the only thing you see is an accelerator and the speedometer.

“Ride Safely” is a cliché that you wish to avoid hearing. Still you protect yourself minimally with a helmet. Not because it’s mandatory, but somewhere you know, safeguarding yourself is your responsibility.

And so, it is your responsibility to provide protection and safeguard your bike…which will come with an insurance policy.

To have a bike insurance is the simplest way to avoid digging a financial hole in case of a theft or an unwelcome incident that may cause any damage to your bike.

This article is a walk-through guide helping you to understand the calculation of the sum insured and premium paid.

This will help you to see a bigger picture of how two-wheeler premium calculation works and how to make the best of insurance.

Generally, there are two main types of policy that an insurance company offers:

  • Comprehensive policy – Covers Own Damage + Third-Party loss or damage
  • Third-Party policy – Covers loss or damage occur to the third-party by the insured vehicle

The best way to “insure” your own bike is by opting Comprehensive two-wheeler insurance policy. Because it covers Own Damage to your bike and also, any loss or damage to third-party.

Let’s see the step-by-step process with a sample calculation of how bike or any two-wheeler insurance calculation works.

For simplicity, the calculation is divided in two sections for a Comprehensive or Package policy:

  1. A) Own Damage B) Third-Party

Comprehensive Two-Wheeler Insurance Policy:

As said above, this type of policy covers own damages due to an accident or collision, or loss of an insured vehicle due to theft or damaged beyond repair, additionally, it covers third party legal liability and personal accident cover.

The premium quote is the based on the summation of factors that are explained below:

PREMIUM:

OWN DAMAGE PREMIUM (fixed by the insurer) – NO CLAIM BONUS (if any) – DISCOUNTS (if any) + THIRD-PARTY PREMIUM AS FIXED BY IRDAI (Mandatory) + RIDER COVER PREMIUM (Optional)

  1. A) CALCULATION OF OWN DAMAGE PREMIUM:

This policy provides protection to your vehicle in the event of damage due any natural or man-made perils, such as earthquake, fire, lightning, riot, strike, terror attacks or accident, theft, etc.

Few terms which are used to determine the Own Damage Premium:

  1. Insured Declared Value or IDV
  2. Geographical Location (Bike registration RTO)
  3. Engine Capacity (CC)
  4. No Claim Bonus or NCB

1) Insured Declared Value or IDV

Insured Declared Value is the maximum amount of money an insurance company will reimburse at the time of claim. It indicates the market value of your two-wheeler, not the resale value.

With time as bike or two-wheeler ages the IDV changes. The Insured Declared Value of your bike is calculated based on the Ex-showroom price and Depreciation.

Note: The Ex-showroom price is different than the on-road price. The on-road price includes road tax and other taxes.

Insured Declared Value calculation based on the Ex-showroom:

TWO-WHEELER AGE                                      IDV Percentage

Between 0 – 6 Months                                    95% of Ex-showroom

Between 6 Months – 1 Year                           85%

Between 1 Year – 2 Years                                80%

Between 2 Years – 3 Years                              70%

Between 3 Years – 4 Years                              60%

Between 4 Years to 5 Years                            50%

Note: The IDV for vehicles aged over 5yrs is calculated by the company from whom you are buying insurance and it might vary from company to company.

Own Damage (OD Premium) = IDV x Premium Rate (Based on Zone, Engine Capacity and Vehicle Age)

2) Geographical Location (Bike registration RTO):

Depending on the registration zone of the bike the premium varies. The zones are categorised as Zone A and Zone B.

The location covered in each Zone is given below:

Zone A:  Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune and Ahmedabad

Zone B: Rest of India

The premium will vary for the policyholder based on the zone. The premium of one who bought a bike under Mumbai registration will vary from the one who bought under Nagpur registration.

3) Engine Cubic Capacity:

Another term or factor that is considered to calculate the two-wheeler insurance is the engine capacity or more commonly known as Engine CC (Engine Cubic Capacity).

Simple thumb rule is higher the Engine CC higher the premium.

A simple example of Premium Calculation of Own Damage for any Two-Wheeler Insurance:

Let’s suppose you bought a 125cc two-wheeler of worth 50,000 (Ex-showroom price), Jan 2015 manufacturing under Mumbai registration. Location: Zone A

Insured Declared Value Calculation:

In Jan 2018 its three years old bike, the IDV will be 60% of the Ex-showroom price:

IDV = 0.6 x 50,000 = 30,000

The Insured Declared Value for this two-wheeler is Rs. 30,000.

Note: The Ex-showroom price differs from company to company. Hence, IDV may vary from company to company which means the variation in the premium amount.

Own Damage Premium Calculation:

Own Damage (OD) = IDV x Premium Rate

Premium rate is based on the geographical location registration, based on Zone A or Zone B.  Since, it is registered under Mumbai i.e. Zone A with < 150cc (Different cc under different Zone will have different Premium Rate based on the vehicle age)

Based on Zone A, <150cc and Vehicle age not exceeding 5 years has a Premium Rate as 1.708%

Premium Rate = 1.708%

OD = 30,000 x 0.01708

OD Premium = Rs. 512

4) No-Claim Discount:

Most of the time people make mistake by opting for the lower premium without considering the effect on the Insured Declared Value. Lower premium means lower IDV.  That means you are lowering the maximum value you may receive against a claim.

But…

There’s another way to lower the premium and that too, without affecting IDV of your favorite bike. That’s where No Claim Bonus comes into the picture.

No Claim Bonus is a discount, which any two-wheeler can avail, provided No Claim was made in the previous year. So if you had a no-claim year, you get a discount of 20% on the premium of second year without affecting IDV.

So, in our case, suppose you had made “No-Claims” so far since Jan 2015 and still continue not to make any claims till the end of Jan 2018, you get 35% discount

OD = 512 x 0.35 = Rs. 179

Own Damage Premium will be Rs. 179

  1. B) THIRD-PARTY LIABILITY COVER CALCULATION:

Insurance Regulatory Development Authority of India (IRDAI) made Third-Party Insurance as mandated under the Motor Act 1988.

This policy just covers any legal liability caused to the third-party due to the insured vehicle. It covers any loss or damage or injury caused by the insured vehicle, to another person or property.

Under this policy, the insured is financially protected in case of:

  • Death or bodily injury to a third party
  • Damage to third party property
  • Accidental Death or Permanent Total Disability of the vehicle’s owner, pillion

Motor Insurance Third Party Rates (2016):

The premium for motor third party rates are decided by the Insurance Regulatory Development Authority of India (IRDA) based on Engine CC:

Condition Relating to Engine Capacity Applicable/ Fixed Premium Rate
Not exceeding 75cc Rs. 569
Above 75cc but less than 150cc Rs. 619
Exceeding 150cc but less than 350 cc Rs. 693
Exceeding 350cc Rs. 796

 

*Note: Motor Third-Party Insurance Premium with effect from 01st April 2016. It may vary or change, and as observed, it hikes every year.

THIRD PARTY PREMIUM CALCULATION:

The Third-party (TP) premium:

TP: Rs. 619 per annum (For 125cc two-wheeler i.e. cc<150cc)

PERSONAL ACCIDENT COVER:

It covers accidental damage and permanent total disability for the owner rider.

Personal Accident Cover covers the owner-rider with a Sum Insured of 1 lakh at a premium of Rs. 50/-

Basic TP Premium + Personal Accident Owner Rider cover

Total TP Premium: 619 + 50 = Rs. 669

Final Premium: Own Damage + Liability/TP

= 179 + 669

= 841 + Applicable ST

If you do not opt any rider as an add-on cover or doesn’t get any discount apart from NCB, the final premium would be Rs. 841 + Service Tax

Additional Discount:

You can avail 2.5% discount or maximum up to Rs. 500 on the premium for bike with Anti-theft devices approved by Automobile Research Association of India (ARAI).

Optional Discounts:

You can avail 5% discount up to maximum amount of Rs. 200 provided you are a Member of Auto Association.

Voluntary Discount: By opting to pay an extra deductible amount over and above compulsory deductibles, you can get a voluntary discount offer.

Add-on Riders:

Sometimes a simple Comprehensive is not sufficient. And this policy may seem insufficient at the time of claim for example this policy does not include the costs of depreciable parts or damage to the engine. This is why it is advisable to top-up with add-on covers.

Different company offers different add-on covers. Based on each add-on the premium will vary. Here’s a simple list of all the important add-on covers frequently bought along with the Comprehensive policy, widening the scope of your two-wheeler insurance policy.

  • Zero Depreciation Cover
  • Consumables Cover
  • Engine Protection Cover
  • No Claim Bonus Protection
  • Return to Invoice cover
  • Roadside Assistance & Towing Rider

EXCLUSIONS:

There are certain exclusions that you should know before buying any two-wheeler insurance policy:

1) Riding without a valid driving license won’t be entertained

2) Riding under the influence of alcohol, drugs and other intoxicating drinks

2) The claim won’t be considered in case of an accident incurred outside the geographical area covered under the policy

3) Wear and tear due to vehicle age

4) This policy holds good for private use and would be considered as unlawful if found to be used for commercial purpose.

I hope this walk-through guide to a two-wheeler insurance premium calculator with a sample calculation will help you to understand the premium amount you are paying and how to save money without affecting your Insured Declared Value. Additionally, you are now aware about the few cases where your claim won’t be entertained by any insurance company.