Is Two-Wheeler Insurance Mandatory For 5 Years?

In keeping with changing requirements, the ever-increasing number of two-wheelers on Indian roads and rising cases of accident and uninsured bikes, the apex insurance regulator IRDAI makes changes in vehicle insurance rules and regulations from time to time.

While you would know that it is compulsory to have bike insurance, you may not be aware about the latest updates about buying two-wheeler insurance. One of the points that will come up when you go to buy bike insurance is about a long-term 5 year policy. Is it compulsory for all two-wheelers to be covered with a 5 year bike insurance policy? How does it compare with a standard 1 year bike insurance? How will it affect the premium I pay and my policy coverage?  

This article is about answering all such questions and clearing any confusion in your mind about 5 year two-wheeler insurance.

About 5 Year Two-Wheeler Insurance & How It Works:

Following a Supreme Court ruling in September 2018, IRDAI has made it mandatory for all new two-wheelers to be issued a 5-year insurance cover. This has been done to ensure that maximum number of two-wheelers remain insured and also to minimise incidents of lapsed, expired policies and uninsured vehicles.

Note that a 5 year cover is mandatory only for third-party (TP) bike insurance policies. Having third-party insurance is anyway compulsory for all vehicles as per the Motor Vehicles Act, 1988.  

If you have just bought a brand new scooter or bike and decided to go with basic third-party bike insurance, you will necessarily have to buy a 5 year insurance policy. But if you choose to purchase comprehensive two-wheeler insurance for your new bike, then your policy tenure will be 3 years and not 5 years.

What Is The Impact Of Buying Long-Term Two-Wheeler Insurance?

From a policyholder’s perspective too, having a 5 year or long-term two-wheeler insurance cover can have many advantages. Take a look at the how you can gain from this move.

• You will save on premium – When you take up a 5 year two-wheeler insurance policy, you make a one-time premium payment and the policy stays valid for 5 years. Because of this long lock-in period you are insulated from annual price hikes in the premium rate. IRDAI revises the base premium for third-party insurance every year. But this annual price increase will not affect you for the validity of your policy tenure. This effectively means that you save money on your two-wheeler insurance premium.
• You won’t have to bother with yearly policy renewal – Since your long-term policy will be valid for a period of 5 years, you need not bother with remembering to renew your two-wheeler insurance every year. That lowers your risk of being caught with lapsed bike insurance while riding your two-wheeler; or the financial burden of paying from your pocket for repairs or spare parts to fix damages to your bike in an accident since you don’t have active insurance cover. By making a one-time premium payment you can be rest assured on all these aspects – annual renewal, third-party liability and financial protection for damages to your bike, for full 5 years.
• You can save your No Claim Bonus – No Claim Bonus or NCB is a benefit that you get in case you do not make a claim during the tenure of your bike insurance policy. It is basically a discount that you earn during renewal on the next year’s premium for every claim-free year. The general rule for a standard 1 year vehicle insurance policy is that you lose the NCB totally if you make even a single claim during the policy tenure. But in a 5 year long-term bike insurance policy the NCB does not become nil and void. It just reduces to the previous percentage slab, so that you still get the benefit of No Claim Bonus.

You get a refund if the policy is terminated – Just like you do not lose the entire no claim bonus when making a claim, a 5 year long-term two-wheeler insurance policy also ensures that you do not lose your entire premium in case of termination. If you terminate your long-term two-wheeler insurance policy for any valid reason (total loss or theft), you will be refunded part percentage of the premium paid for the unutilised term or the remaining years of your policy.

To conclude, while the mandatory 5 year tenure for new bike insurance policies will take some getting used to, it is definitely a move that has been well thought through and has many benefits for the policyholder. Check out the details with your insurance provider.

You can buy either 5 year third-party bike insurance or 3 year comprehensive two-wheeler insurance cover online by on an online aggregator site or buy two wheeler insurance directly from the insurance company by visiting their website.