Two-wheeler insurance premiums are determined by a combination of factors that include the type of coverage, the vehicle’s specifications, and the policyholder’s profile. Understanding how these premiums are calculated can help you make informed decisions when choosing a policy. Here’s a breakdown of the key components:
1. Type of Insurance Policy
- Third-Party Liability Insurance: Covers damages to a third party. Premiums are regulated by the Insurance Regulatory and Development Authority of India (IRDAI) and are based on the engine capacity.
- Comprehensive Insurance: Offers both third-party liability and own-damage cover. The premium is higher and depends on several factors such as vehicle age, location, and additional covers.
2. Vehicle’s Specifications
- Engine Capacity (CC):
- Larger engine capacities typically result in higher premiums, as the potential risk and repair costs are higher.
- Example: A bike with a 150cc engine will have a lower premium compared to a 350cc bike.
- Age of the Vehicle:
- Older vehicles have lower premiums because their insured declared value (IDV) depreciates over time.
- Make and Model:
- High-end bikes or models with expensive spare parts attract higher premiums.
3. Insured Declared Value (IDV)
- What It Is: The current market value of the two-wheeler, accounting for depreciation.
- Why It Matters:
- A higher IDV leads to a higher premium.
- It determines the maximum claim amount you can receive in case of theft or total damage.
4. Policyholder’s Profile
- Age and Driving Experience:
- Young, inexperienced riders may attract higher premiums due to perceived risk.
- Claim History:
- No Claim Bonus (NCB) is awarded for claim-free years and can reduce premiums by up to 50%.
- Location:
- Urban areas with higher traffic density and accident rates result in higher premiums compared to rural areas.
5. Additional Coverages (Riders)
- Add-ons such as zero depreciation cover, personal accident cover, roadside assistance, or engine protection increase the premium.
6. Deductibles
- Voluntary Deductible:
- Policyholders can opt to pay a part of the claim amount. Choosing a higher deductible reduces the premium.
- Compulsory Deductible:
- A fixed amount mandated by the insurer that doesn’t affect the premium.
7. Regulatory Factors
- Taxes and Levies:
- Premiums include Goods and Services Tax (GST), typically set at 18%.
- IRDAI Guidelines:
- Third-party premium rates are revised annually by the IRDAI, influencing the overall premium.
8. Anti-Theft Devices
- Installing ARAI-approved (Automotive Research Association of India) anti-theft devices can reduce the premium, as they lower the risk of theft.
9. Usage of the Two-Wheeler
- Vehicles used for personal purposes usually have lower premiums compared to those used for commercial purposes.
Calculation Example
Here’s a simplified example of how a premium is calculated for a comprehensive policy:
- IDV of Bike: ₹50,000
- Base Premium (Own Damage): ₹2,000
- Third-Party Premium: ₹750
- Add-Ons (Zero Depreciation): ₹500
- GST: 18% of ₹3,250 = ₹585
Total Premium: ₹3,250 + ₹585 = ₹3,835
Conclusion
The two-wheeler insurance premium is influenced by multiple factors, including the policy type, vehicle specifications, and additional covers. Being aware of these components allows you to choose a policy that offers the best value and adequate coverage. Use online premium calculators for quick estimates tailored to your requirements.
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