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Why Multi-Year Bike Insurance is Better than a One-Year Policy

Why Multi-Year Bike Insurance is Better than a One-Year Policy?

Regular maintenance and servicing are very important aspects of taking care of a bike. And so is having valid insurance for the two-wheelers at all times. Renewing the policy every year could be tedious but must be done without fail or you may have to pay a heavy penalty as riding an uninsured bike is against law. However, you can save yourself the hassle of remembering the insurance expiry date and then renewing it before it lapses by opting for a long term bike insurance policy. It is as simple as it sounds. Long term insurance policy provides coverage for more than a year, depending on the policy term.

 According to the Insurance Regulatory and Development Authority (IRDAI), at present, minimum tenure of five years is compulsory only for third party bike insurance. For a comprehensive two-wheeler insurance cover, the policy tenure will be for three years instead of five years. You can check the features and benefits of a multi-year two-wheeler policy online and compare between the long-term plans provided by different insurers. Some of the benefits of multi-year bike insurance are:

  • No annual renewals

A multi-year policy would cover your vehicle for the long term. You do not have to renew the policy every year, which means there would be no hassle of memorising the dates for the renewal or the risk of paying fines in case of missed renewals. Also, the system of online purchase and renewals of long-term policies is an added advantage.

  • Low premium

You can save some extra money on the premium amount as the premium for a multi-year policy is less than that for a one-year policy. Factors such as inflation are responsible for the increase in the premium rates every year. So, during every renewal, you end up paying a higher premium, about 10-15% higher for the same amount of coverage. Securing your bike for the long term would prevent the effects of fluctuations as the premium amount gets locked for three to five years.

The IRDAI is responsible for fixing the rates of third-party two-wheeler insurance policies. Insurance companies are not entitled to sell basic third-party insurances at a higher price than what is fixed by the IRDAI. However, the regulatory body increases the insurance premiums by almost 20% annually. 

For example, if you have purchased bike insurance with a one-year term this year, then most likely you will end up paying a 20% higher premium at the time of policy renewal next year. You can avoid this with a multi-year policy. If you purchase five-year insurance, you will be protected against the increased premium as it cannot be increased within the tenure of the policy. The insurance companies may also provide discounts on long-term policies.

  • Avoid policy lapses

Renewal of an expired policy involves lots of processes such as inspection, IDV calculation, higher premium rates, additional paperwork etc. The renewal process can be tedious and time-consuming. In multi-year policies, there is no such problem. Through a single purchase, you are protected against the serious consequences of policy-lapse for multiple years.

  • Get No Claim Bonus (NCB)

For every claim-free year, you will earn a no-claim bonus in the following year. This is an incentive given to you by the insurance companies for safe driving. You get NCB in the form of a discount on the insurance premium at the time of the renewal. Generally, the NCB for the first claim-free year is 20% and may increase up to 50% in the fifth claim-free year. But there is a risk of you losing your NCB if you do not renew your bike insurance within the grace period from the expiry.

For long-term two-wheeler insurance, through online or offline mode, you do not need to keep track of the accumulated NCB every year. Some Indian insurance companies have a different NCB structure from others for multi-year policies and that may get you bigger discounts. For a multi-year policy, you may get an NCB of 20% at the time of renewal.

  • Avoid penalties

As per the latest Motor Vehicles Act (MVA) of India, you cannot ride an uninsured bike and you may have to pay up a big amount as a fine if you are caught by the traffic police.

  • Avoid break-in

If you do not renew your insurance for two years consecutively and want to go for a new bike insurance policy, the insurer may inspect your bike. This is because of the long gap between the earlier and new policies. These are called break-in policies and can lead to two situations:

  • The insurance company may reject your application if the bike is not in an "insurable" condition, according to them.
  • The insurance company may accept your request but the insurance premium will be higher and will negatively affect the Insured Declared Value (IDV) of your bike.

In the case of a long-term two-wheeler insurance policy, these problems would not arise. 

  • Easy policy-cancellation process

You can cancel a long-term bike insurance policy whenever you want. There is no rule that you have to complete the entire policy period before applying for a cancellation. You can withdraw from the existing plan in case you find a better plan.

In such a situation, the insurer will return the unutilised premium amount and the NCB from the existing policy can be transferred to the new plan to avail the benefits. The only requirement is that you should get an NCB certificate from your current insurer and purchase the new policy from a different insurer before cancelling the existing policy. You have to submit the NCB certificate to the new insurer so that your bonuses will be transferred to the new policy.

A five-year policy is a long-term commitment. It can happen that after purchase, you do not like the services of the insurance provider or may find that the insurer has a complex claim process—either way, you can simply cancel your policy and switch to a different insurer.

In India, the Motor Vehicle Act, 1988, requires every two-wheeler owner to have valid third-party insurance. But, as per a General Insurance Council report, approximately 60% of the two-wheeler owners in the country ride their bikes without a valid insurance policy. This implies that there are millions of people who can face a significant amount of financial risk every time they ride their bike. As a solution to the problem, the Supreme Court, in 2018, ruled in favour of a five-year compulsory third-party bike insurance policy for new two-wheeler owners. The existing two-wheeler owners should also consider multi-year insurance due to the benefits discussed above.

Considering the benefits of multi-year insurance, rethink your decision to ahead with a one-year insurance policy. Remembering the renewal date itself is a challenge with a one-year policy and missing it can cause you a lot of trouble. So, in case the date for your insurance renewal is nearby, you must consider purchasing a multi-year bike insurance plan to enjoy its benefits.