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Can a Claim Increase Your Third-Party Bike Insurance Premium

How Can a Claim Impact Your Third-Party Bike Insurance Premium?

Over the last few years, the Insurance Regulatory and Development Authority of India (IRDAI) has introduced many regulatory changes in motor insurance policies. One of them is the mandatory third-party bike insurance policy for two-wheeler owners. Third-party insurance covers you against all financial liabilities due to injury to a third-party person or damage to their vehicle during an accident. However, the question remains how does a third-party claim affect the policy premium? To answer this, you must know the importance of factors such as the vehicle model, age, engine capacity, variant and model that are considered during the premium calculation.

The factors that are taken into consideration while calculating the premium of third-party bike insurance includes:

  • Insured Declared Value (IDV) of the two-wheeler

IDV is the current market value of the vehicle calculated after deducting the depreciation from the selling price. The depreciation rate varies for different types of bike models available in the market. Registration cost and taxes are not taken into consideration for the calculation. The premium rate is directly proportional to the IDV of your vehicle.

  • The capacity of the engine

Calculation of the premium rate is based on the two-wheeler's engine's cubic capacity (cc). According to the Indian Motor Tariff Act, the engine capacity is divided into four different categories:

  • Less than 75cc
  • Between 75cc and 150cc
  • More than 150cc but less than 350cc
  • Above 350cc
  • Age, variant and model of the two-wheeler

For annual premium calculation, the model, variant and age of the two-wheeler are important determining factors. These features of a two-wheeler are crucial for safety ratings and the vehicles with the highest safety ratings are eligible for premium discounts. If a two-wheeler has a high chance of causing an injury or damage to a third party during an accident, the premium for the vehicle will be high.

  • Location

The premium rate for two-wheelers is different for the rural and urban areas. It is seen that the rate of accidents is higher in urban areas as compared to small towns. So, a policyholder residing in a metro city or an urban area would need to pay a higher premium than his counterpart in a rural setting. Other factors that affect the premium rate due to geographical location includes:

  • Cost and frequency of legal litigation
  • Medical care expenses
  • Weather trends
  • Repair costs


    IRDAI Rules Regarding Third-Party Bike Insurance

    IRDAI has some specific rules regarding the claims and cost of the premium for third-party bike insurance. According to the IRDAI:
  • There will be no impact on the premium to be paid for your two-wheeler insurance during policy renewals, even if you make a claim. The IDV for the policy will be adjusted based on the selling price of the vehicle, model, age and rate of depreciation in the following year. 
  • The No Claim Bonus (NCB) feature is not applicable for third-party insurance policies. NCB applies only for the standalone own damage policy and, in the case of comprehensive policies, for the own damage part. 
  • A third-party insurance policy is separate from the own damage policy. A third-party policy will have no impact on the sum insured of your bike. Under this policy, there is no limit for the liability coverage for injuries and death, but there is a limit to the coverage for property damage.
  • An increase in the premium rates for third-party bike insurance can take place only if IRDAI implements a hike in premium in a particular fiscal year.

    Since the own damage premium is under the control of insurance companies, it may go up after a claim is made in a particular year. The process is the same for the own damage part of a comprehensive policy. On the other hand, the premium for a third-party insurance policy is fixed through IRDAI.

    Exclusions of the policy

    You must read the exclusions and the terms and conditions written on the policy document before buying an insurance policy for your two-wheeler. 
  • Modifications made to the bike

Many two-wheeler owners carry out modifications to improve the appearance and performance of the bikes. This may increase the premium of your two-wheeler policy.

  • Age of the rider

Usually, a rider who is in his 20s would have to pay a higher premium because in his case, the insurance companies assume that he is at a greater risk than a 30-year-old with more than 10 years of driving experience.

  • Driving record of the buyer

If you have any previous history of causing accidents or driving risk, the premium amount may go up. The insurer may re-evaluate the premium rates after a claim or driving violations made by you. The evaluating process differs from one insurer to the next.

The insurers have different rules for assessing driving records. Some policyholders may get evaluated with an extremely bad driving record. If your driving record shows serious violations of driving rules or frequent accidents, the insurance company may not renew your policy further. For example, in the case of drunken driving, almost all insurance companies may decline to renew your policy.

  • Claim amount above a specified level

If the claim that you have filed consists of an amount that is above a specific level and the accident happened due to your fault, the insurer may increase the premium by a certain percentage. The amount, percentage and ceilings of the increment vary between different insurers and you may have to pay the increased premiums for three years after a claim is made.

  • Always disclose about accidents

If you are not filing a claim after an accident due to fear of the cancellation of the policy or an increased premium, you may land up in a risky situation later due to hiding the accident details, even if it is a minor one.

A third-party individual may take legal measures against you after several weeks or months, and your insurer may face difficulties to defend you with proper evidence or a lack of it. This would be because you did not report the incident, with all details, on time.

Also, the failure to report an accident within the timeline specified by your insurer might result in losing your insurance coverage.  Your insurer may even decide to cancel your policy altogether due to non-disclosure of the accident within timelines.

So, a third party bike insurance claim does not have an impact on the premium, thus, freeing the policyholder from any additional burden. In addition, as per the IRDAI norms, insurers are not allowed to increase the renewal premiums if a third-party claim takes place.