What is Insurance?
If we have to simply put it – Insurance is an arrangement by which a company guarantees to provide compensation for specified loss, damage or death upon an unfortunate incident. All a person has to do is buy an insurance policy and continue paying premiums (which are generally small amounts as compared to the compensation you are entitled to in case of a mishap).
Vehicle Insurance, which is insurance for cars, trucks, motorcycles or any other road vehicle, provides financial protection to the owner of the vehicle against any damage or loss and liability, resulting from a collision or a road accident.
Motor Insurance in India
Vehicle insurance in our country is governed by the Motor Vehicle Act and Insurance Act. It is mandatory for all types of vehicles, whether private or commercial, to have it in one or the other form.
When we talk about two-wheeler insurance in India, it is broadly categorized in two formats. For ease of understanding let us consider You – the insured as person A and the other person involved in an accident with you as B.
Scenario: A (the insured) happens to crash into B’s vehicle.
- Third Party Insurance: This type of insurance provides coverage to damages claimed by B for injuries caused to him or damages to his vehicle or property. Any injuries to A or damages to his motorcycle or scooter are NOT covered in this type of insurance and he will have to bear these expenses himself.
- Comprehensive Insurance: As its name suggests, in addition to the cover provided to B, this type of insurance also covers A for damages caused to his body or his two-wheeler involved in the accident. It also covers loss of vehicle due to theft or natural calamities.
Typical Terms Used in Two-Wheeler Insurance
- IDV – Insured Declared Value (or IDV) is the highest amount you are liable to receive upon total loss of your two-wheeler. In short, it is the current market value of your motorcycle/scooter.
- Premium – The amount you need to pay to your insurance company for insuring your two-wheeler.
- Voluntary Deductible: This is a way to reduce premium of your motorcycle insurance. For example, you choose a voluntary deductible of Rs 2500, the insurance company will provide a certain discount on your premium. In case of a claim, out of the approved amount, you will need to bear Rs 2500 and the remaining amount will be paid by the insurance company.
- NCB: No Claim Bonus is an incremental discount given to the insurer if he does not make any claim in the year. This discount is applicable on the next year policy.
- Zero Depreciation Cover: Under a normal insurance coverage claim, you will not get the entire amount of the damages owing to the depreciation of its parts (for example, rubber, plastic etc). However, Zero Dep insurance does not consider this depreciation and hence, the claim amount you receive is higher. This also means that its premium is more than the regular comprehensive coverage.
It is very clear from the definition of insurance that it is a very important financial instrument as it provides protection against financial losses and liabilities caused due to an accident or theft of your vehicle or any natural calamity. In addition to this, Indian laws also mandate vehicle owners to purchase at least one type of vehicle insurance (from the two we mentioned above).
With opening up of the insurance sector to private players, the industry has become very competitive which means availability of many insurers and better offers for the consumers which makes buying an insurance policy real seamless and easy. Apart from everything else, the biggest asset of having your motorcycle insured is peace of mind as you need not worry about any major financial implications if you happen to have an unfortunate accident. All these parameters make two-wheeler insurance the single most important product and a must-buy for all you motorcycle and scooter riders.