As a two-wheeler owner, while you were zooming around on the roads, the insurance regulator, IRDAI, has brought about certain changes in the insurance rules. Some major overhaul of the insurance rules has taken place over the last 12 months.
While the third-party (TP) insurance cover continues to be a compulsory cover, there are 3 important changes that one needs to know before getting bike insurance – One, a multi-year long-term TP cover, Enhancement in personal accident coverage and thirdly the unbundling of PAC.
1. Long term two wheeler insurance
Effective September 1, 2018 (registration date) the nature of insurance policies have gone long term. For new bikes purchased after that date, the third-party premium has to be paid upfront for 5 years. However, owners of two-wheelers purchased before that date may continue to pay as it is. “It is now compulsory to buy a long-term TP (Third-Party) cover as mandated by IRDAI,” says Tarun Mathur, Chief Business Officer- General Insurance, Policybazaar.com.
Remember, its only the TP premium, which as it is fixed by IRDAI based on the capacity of the vehicle, is to be paid upfront. The own-damage (OD) premium may still be paid on an annual basis.
Also, there is no impact on the IDV and the no-claim bonus portion and neither it is correct to say that premium will increase as it is only the upfront cost that will go up. After paying 5-year premium upfront, one need not pay any TP premium for the next four years.
Options available: Now, the bike owner has two options – Either to go for a Multi-Year Long Term Comprehensive Policy Or else a Bundled Policy.
Under a Long Term, Comprehensive Policy both TP and OD coverage is for 5 years. Here the premium is also collected for 5 years and policy renewal will come into question only after 5 years when the policy is about to expire.
But, what if one wants to pay OD premium only for one year and renew it the next year onwards? In that case, one can opt for a Bundled Policy, wherein, “The TP coverage is of 5 years but OD cover is applicable for 1 year only. Here, the OD premium will have to be renewed every year as compared to a TP cover which is possible for renewal only after 5 yrs,” informs Mathur.
2. Coverage for personal accident cover (PAC) enhanced
IRDAI has already enhanced the coverage for the personal accident from Rs 1 lakh to Rs 15 lakh. This rule will apply even to the existing owners. While, earlier the annual premium of Rs 50 was to be paid for a cover of Rs 1 lakh, now the annual premium will be Rs 750 for a cover of Rs 15 lakh. Further, insurers cannot force owners to take a long term PAC and hence one may buy a one-year PAC as well.
3. Stand-alone PAC policies allowed
What if you as a bike owner already have a PAC from any non-life insurance company? Or, what if you have more than one bike? Typically, a personal accident policy covers accidental death or pays a certain sum of money to the policyholder in case of any partial or total disability arising out of an accident.
Effective January 1, 2019, IRDAI has unbundled the compulsory personal accident cover and permitted the issuance of a stand-alone policy. So, effectively, one need not pay for PAC again if he or she has a PAC of at least Rs 15 lakh bought from same or any other insurance company. “What it means is a customer who already has a standalone PA cover or has another bike where the owner-driver PA cover is already taken does not need to buy the cover twice. Also, since standalone PA cover also suffices, customers may buy a standalone PA cover of Rs.15 lakh from any of the insurers across the General Insurance Industry,” says Mathur.
What to do
Choose between the two options based on your specific requirements. Many insurers provide a discount on the premium rates if one opts for multi-year policies. Also, the hassle to keep remembering and renewing each year is minimised. Importantly, long term policies take care of the risk of tariff increase as the regulator keeps revising it every year.