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IRDAI Rules For Two Wheeler Insurance Policies

Team AckoMay 16, 2022

IRDAI stands for Insurance Regulatory and Development Authority of India. It is an autonomous body that regulates every aspect of the Indian insurance space. All insurance companies in the country are obliged to work in accordance with the rules laid down by the IRDA. IRDAI rules for two-wheeler insurance and other types of insurance policies in the country are very strict and not only insurance companies but also policyholders need to comply with these rules.

IRDAI Rules For Two Wheeler Insurance Policies

IRDA Rules For Two-Wheeler Insurance Policies in India:

IRDA rules for two-wheeler insurance policies include various rules and regulations related to the use of bike insurance, its policies, terms and conditions, inclusions, exclusions, and the duration of coverage.

IRDA Guidelines for Bike Insurance Covers:

IRDAI has laid out the rules which every insurance and policyholder must follow in order to achieve fair practices when various incidents related to the insured bike occur. Let’s take a look at IRDA rules for bike insurance policies.

1. Third-party Liability Insurance:

The Third-party two wheeler liability policy will cover the financial liability of the policyholder towards any third party that has been affected or suffered a loss due to the insured two-wheeler. Here is the list of IRDA rules for Third-party Liability policies:

  • The insurance company should provide monetary compensation in case of death or injury caused to the third party due to the insured bike.

  • The amount of compensation will be decided considering the extent of the injury suffered by the third party. In case of death, the compensation amount will be calculated as per the net worth of the deceased third-party.

  • The insurance company will bear the cost of damage to the property that belongs to a third party. The extent of damage will be considered for calculating the amount of compensation.

  • The insurance company should compensate the paid driver of the insured two-wheeler in case of death or injuries.

2. Comprehensive Insurance:

The insurance company should compensate the third party as per the mentioned rules. Additionally, the following rule will apply:

  • The company should provide compensation to the owner/driver of the insured vehicle under the conditions of a Personal Accident Add-on.

  • The insurance company should bear the cost of repairing or replacing the components of a damaged bike as per the terms and conditions laid down in the insurance policy.

  • The insurer should pay compensation to the policyholder in case of theft or total loss as per the policy terms.

  • The insurance company should bear the monetary cost of repair or replacement of components in case of a natural or man-made calamity in accordance with the policy terms.

  • The insurer should bear any costs mentioned under the additional coverages bought by the policyholder while buying or renewing the insurance policy.

Types of Coverages:

A bike insurance coverage can be of two types depending on which liabilities are covered under the policy. One can choose from either the most basic form of bike insurance or an extensive policy that can be customized to an extent. Note that buying a bike insurance policy is mandatory by law under The Motor Vehicles Act, 1988. Thus, the policyholder can choose which type of coverage he/she wants to buy. However, not buying a two-wheeler insurance policy is not an option in India. Here are the types of bike insurance coverages available:

1. Third-party Liability Bike Insurance

This is the most basic form of bike insurance available for purchase in India. It offers a financial cover to the owner of the insured bike for compensating a third-party that has suffered a monetary loss or death. This coverage also includes a personal accident cover for the owner of the bike. Additionally, the Third-party Liability Cover also offers legal aid to the policyholder if required.

2. Comprehensive Two-wheeler Insurance Policy

This is a type of bike insurance coverage that is extensive in nature. It offers the compulsory Third-party Liability cover and coverage for the damage caused to the insured bike. It also offers coverage for theft, total loss, or natural and man-made calamities. The reason that a Comprehensive Bike insurance policy is preferred over a Third-party Liability policy is that the former can be customized with the help of additional coverages as provided by the insurance company, plus discounts like No Claim Bonus are also available.

Personal Accident Cover For Owner/Driver:

As the name suggests, the Personal Accident Cover is a compulsory add-on coverage for the owner of the insured bike that is available with both Comprehensive and Third-party policies. Here are the coverage details of the Personal Accident Cover:

  1. Sum Assured: The Personal Accident Cover offers a Sum Assured of Rs. 15 Lakh in case of death or total disability of the owner of the insured bike.

  2. Coverage: The following coverage is offered under the Personal Accident Add-on:

Coverage Compensation (% of Sum Assured)
Loss of two limbs 100%
Loss of eyesight in both eyes 100%
Loss of one limb 50%
Loss of one eye 50%
Loss of one eye and one limb 100%
Death 100%

Exclusions of Two-wheeler Insurance policy:

Exclusions of a bike insurance policy are situations in which the insurance company is not bound to settle a claim raised by the policyholder. The exclusions of a bike insurance policy are mentioned clearly on the policy document. The policyholder can read these exclusions before purchasing the policy as well. Such exclusions are common across all bike insurance companies with slight changes. They are mainly laid down by the IRDA. Here is a list of bike insurance exclusions for your reference:

1. Mechanical Or Electrical Damage

The bike insurance policy offers coverage for an unforeseen incident that may occur and cause a monetary loss to the owner. Thus, technical damages, like electrical or mechanical damage, are not covered under bike insurance.

2. Absence Of Valid Documents

It is of utmost importance that one carries all the required documents while riding the bike. Documents like driving license, registration certificate, bike insurance policy and Pollution Under Control (PUC) certificate are supposed to be carried along while riding the bike even if you are riding in the vicinity of your house. A claim might get rejected if the policyholder was not carrying these documents and damage occurred.

3. Intentional Damage

Any damage caused to the insured bike with a malicious intent of raising a claim will not be entertained.

4. Consequential Loss

One needs to be very careful about consequential loss as this is excluded from a bike insurance policy. This is the damage which is caused when you try to start a bike that is already damaged, say due to floods or an accident.For example, Mr A met with an accident that caused 50% damage to the bike. If he tries to start the bike, the damage will increase to 80%. In this case, the claim will be approved for the first 50% damage and Mr A needs to bear the cost of repairing the remaining 30% damage.

5. Damage Caused Outside The Geographical Boundary

Most insurance companies offer coverage for damages caused to the insured bike within the geographical limits of the country. Unless a special add-on cover is purchased, any claim to repair damage outside the country will be rejected.

6. Not Following The Law

Raising a claim for damage caused when the rider was not following the rules and laws of the land will not be allowed.

7. Illegal Activities

Damage caused due to taking part in illegal activities for example illegal racing will not be allowed for claims

8. Riding In An Intoxicated State

Riding the bike under the influence of intoxicating substances like alcohol or drugs can prove to be highly dangerous for the rider and for other people in the vicinity of the bike. Thus, doing so is an offence under The Motor Vehicles Act, 1988. Any claim raised for the repair of damage when riding the bike in an intoxicated state will not be allowed.

9. Normal Wear And Tear

Every vehicle suffers from normal wear and tear due to usage. Its parts can get damaged due to prolonged use. The claim for repairing or replacing such parts is not allowed under bike insurance.

10. Damage Due To War

Damage to the insured bike under war-like circumstances cannot be claimed under bike insurance.

11. Damage/Theft Caused Due To Misplaced Keys

Many times a bike rider may forget his/her bike keys in the ignition. This could result in bike theft. Your bike insurance company is not liable to pay for the loss in this situation.

IRDAI New Rules for Two-wheeler Insurance:

IRDA new rules for two-wheeler insurance include the following:

  1. If the penalty for an offence committed by the bike rider is not specifically mentioned in the new rules, then the challan of Rs. 500 for the first time and Rs 1500 for repetition of offence is charged.

  2. Failing to abide by the rules related to the road will attract a penalty of Rs. 500 to 1000.

  3. If a rider does not cooperate with the authorities, he/she will be charged an additional  Rs. 2000 for non-cooperation.

  4. Riding the bike without a driver’s license will attract a fine of Rs. 5000.

  5. Rider riding a bike after disqualification will be charged Rs. 10000.

  6. Overspeeding will attract a fine of Rs. 1000.

  7. For dangerous driving, the rider will have to pay Rs. 1000 and/or face 6 months of imprisonment.

Also, read: How to Cancel A Bike Insurance Policy and Get A Refund?

Factors That Affect Bike Insurance Premium Calculation:

Following factors can have an impact on the cost of your bike insurance policy:

1. Type of Bike Insurance Policy

This is one of the major factors that affect the cost of a bike insurance policy. The cost of your two-wheeler insurance will be determined by the extent of coverage that the policy offers. If it is a Third-party Liability only policy, its cost is low because it offers coverage to third parties involved in an accident with the insured bike. Its cost is decided by the IRDA. However, if you choose to buy the Comprehensive bike insurance policy, you may have to pay more because it offers more coverage as compared to the Third-party Liability policy.

2. Rate of Depreciation

Depreciation is the reduction in the monetary value of a bike with time and usage. Depreciation suffered by the bike is taken into consideration while calculating the cost of its insurance policy. The older the bike, the lesser will be its insurance premium. This also implies the claim amount in case of damage to the insured bike will be less due to the depreciation factor.

3. Lapsed Policy

When you have a lapsed bike insurance policy, you lose all the discounts and the cost of your two-wheeler insurance increases. Thus, it is advised to get the policy renewed even before the expiry date.

4. IDV (Insured Declared Value)

IDV is the value of the insured bike that will be paid by the insurance company in case of bike theft or total loss. The policyholder is required to declare the IDV each year while renewing the bike insurance policy. Setting a new value each year is very easy. All you need to do is search for the current market value of your bike and set the IDV approximately equal to it.

5. Memberships of The Automobile Association of India

Certain associations like The Automobile Association of India allow their members to avail a discount on their bike insurance policy. This could reduce the premium. 

6. Number of Add-ons

Various additional coverages or add-ons can be purchased with a two-wheeler insurance policy. Add-ons increase the extent of coverage and let you claim for damages that are usually not covered in a basic comprehensive policy. However, additional coverages can increase the cost of your bike insurance policy.

7. Claim History

Claim history refers to the number of claims that you have raised previously. This is directly related to the No Claim Bonus on your bike insurance policy. Frequent claims can increase the cost of your policy. Multiple claims are not preferred by insurance companies as they could consider you a rash driver or a risky profile to insure.

8. Modifications

Modifying bikes to enhance aesthetics or performance is very common. Some people go out of their way to modify their bikes with expensive accessories. This can have an impact on the bike insurance premium calculation because you would want to insure an expensive accessory against damages.

Frequently Asked Questions:

How can I reduce my bike insurance premium?

You can reduce your bike insurance premium by becoming a member of the Automobile Association of India, by installing an anti-theft device approved from the Automobile Research Association of India (ARAI), Pune, by opting for voluntary deductibles, and by riding the bike safely and accumulating the No Claim Bonus.

Do I need to keep original documents in the storage space of my bike in case of on-road checks?

No, the rider is allowed to keep the copies of the required documents like the Registration Certificate of the bike, insurance policy, driving license, and PUC. You can use DigiLocker mobile application to store the soft copies of such documents as well.

Which documents are required to file a bike insurance claim?

Your bike insurance company will tell you about the list of documents you need to submit while raising a claim. Usually, the RC copy of the bike, claim form, repair invoice and payment receipt, an estimate of the loss, and/or First Information Report (FIR) are required to file a claim.

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