How to Choose Between Long-term and One-year Two wheeler Insurance
According to a recent report, about 60% of vehicles on Indian roads still lack insurance. Furthermore, the majority of these vehicles are two-wheelers. (Source: General Insurance Council). One of the many things we often overlook in our daily rush of activities is renewing bike insurance. You may not even realize your bike insurance has expired until you are caught by a traffic policeman.
Therefore, the IRDAI has made long-term or five-year third-party bike insurance mandatory for all two-wheeler owners in India. This ensures adequate coverage for all users of Indian roads.
Strangely, not many people are aware of a long-term two-wheeler insurance plan. Most of us have grown habitual of renewing our bike insurance once a year and being through with it. However, as instructed by the insurance authority recently, it has been made mandatory for every two-wheeler to carry a five-year third-party bike insurance policy. It means that if you purchase a third-party policy today, it will remain in effect for the next five years.
This article will discuss the crucial differences between a one-year bike insurance policy and a long-term two-wheeler insurance plan.
What is a One-year Bike Insurance Policy?
A one-year bike insurance policy is exactly what the name implies—it is valid for one year only and must be renewed annually. Several people view a one-year policy as a fuss as they have to remember the expiration date and renew the policy every year. However, there is an advantage—if you are dissatisfied with the policy or the services of your insurance provider, you can easily switch to a new policy or insurer after one year.
What is Long-term Two wheeler Insurance?
In essence, long-term two-wheeler insurance covers your bike for more than one year. The actual policy tenure might change depending on the term you select—two, three, or a maximum of five years.
With a long-term bike insurance plan, you can extend the duration of your coverage for the same price. If you currently have a single-year policy, you can upgrade it to long-term coverage at renewal.
Key Differences Between One-year Bike Insurance and Long-term Two-wheeler Insurance Policy
It is easy to be confused between a one-year policy and a long-term plan. After all, it is an investment you will have to make. However, if you are unsure which one to choose, looking at some of the differences between their benefits might help you make the right choice.
- Policy lapse
Compared to a two or three-year policy, an annual policy has three times the likelihood of entering the policy lapse mode. This proves there is a threefold increase in the possibility that a policy will have difficulties being reinstated after it has lapsed.
If a policy has lapsed, the following measures are taken by the bike insurance provider:
- Calculating the bike’s IDV to determine the premium amount
- Dispatching of new/reinstated policy document
- Careful examination of the bike
- Getting the paperwork ready for reinstated policy cover
If an insurance policy lapses, you might have to pay a higher premium or get a lower IDV.
- NCB benefit
Compared to an annual policy, the No Claim Bonus offered on a long-term insurance policy is higher. If you do not file a claim throughout the one-year policy period, you are entitled to a 20% discount for the first year of the policy. If you do not make any claims, the No Claim Bonus keeps growing until it reaches 50% in the fifth year.
In contrast, if you do not file any claims during a long-term two-wheeler insurance policy period, you are eligible for a 40% NCB discount. Further, if you file a claim once, twice, or thrice throughout the policy term, you are entitled to 30%, 20%, and at the end, 0% NCB discount, respectively.
- Flexibility
A one-year two-wheeler insurance policy is more versatile than a long-term one. Long-term two-wheeler insurance binds you to the bike insurance company for a longer period than an annual plan. The latter allows you to switch insurance companies at the time of renewal immediately after the first year.
- Insured Declared Value
An Insured Declared Value or IDV of your bike is the maximum amount your bike insurance company will pay in case your bike gets stolen or faces total damage. Prices are set as per the manufacturer’s market selling price. For both one-year and long-term policies, the IDV of the bike and any other components attached to it are predetermined.
- Refund on cancellation
If you have already made a claim and want to cancel your one-year bike insurance, there will not be any refunds given. However, if you have long-term two-wheeler insurance, you will qualify for reimbursement depending on the part of your policy that has not been used.
- Premium amount
As per the guidelines laid down by the IRDAI, the cost of a policy’s premium rises yearly. The cost of premiums for one-year insurance increases by more than 20% annually. You can cut costs with a long-term insurance plan. Even though you will have to pay a little bit extra upfront, your long-term two-wheeler insurance requires only one premium payment for the whole policy period. Additionally, for choosing a long-term insurance plan, the bike insurance provider offers an extra discount on the premium.
Which One to Go for? One-year or Long-term Plan?
According to the IRDAI, long-term 5-year insurance is mandatory for all newly purchased two-wheelers. ( Source: Financial Express) When weighing the benefits and drawbacks of both plans, long-term bike insurance is more affordable and hassle-free in terms of yearly renewal. However, one-year insurance policies give you more freedom but they can be costlier than long-term plans.
So, if you are seeking a beneficial and affordable solution, long-term insurance is the best fit. Otherwise, a one-year bike insurance policy is the ideal option if you want flexibility and minimal protection.
Choosing the Ideal Safety Shield for You and Your Bike
Long-term two-wheeler insurance or a one-year policy—it totally depends on what you seek from your insurance plan and at what cost. Choose the best policy that meets your needs and is within your budget. While long term two wheeler insurance provides stability and better savings, a one-year bike insurance plan is the best if you want flexibility.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.
