Purchasing a new motorcycle in India comes with several responsibilities, including mandatory insurance coverage. A common question among many new owners is: “Is bike insurance mandatory for 5 years?” The short answer is yes. The Government of India has made it compulsory for all new two-wheelers to have at least five years of third-party insurance at purchase. This rule ensures continuous coverage and compliance with traffic laws.
This guide provides insights into why 5 years of insurance is mandatory for new bikes, the types of insurance available, the benefits of a long-term policy, and what to consider when selecting the right coverage for your vehicle.
What is 5-year bike insurance?
5-year bike insurance is a long-term insurance policy that covers your two-wheeler for five consecutive years. Hence, the Insurance Regulatory and Development Authority of India (IRDAI) made two-wheeler insurance mandatory for 5 years for all new bikes. It includes a 5-year third-party plan and a 1-year own-damage cover.
Why is bike insurance mandatory for 5 years?
Before new bike insurance rules, many riders did not renew their policies after the first year. With the move to make bike insurance mandatory for 5 years, authorities can now make new bike owners remain legally compliant for longer.
Which insurance is mandatory for two-wheelers in India? According to the Motor Vehicles Act, third-party liability insurance is compulsory. This same requirement extends to the new rule. Buyers of new bikes must purchase at least third-party liability insurance for a five-year term. However, opting for a comprehensive insurance policy (which covers both third-party liabilities and damages to your bike) is also possible.
By adopting this approach, India aims to reduce the financial burden on accident victims, improve compliance rates, and streamline the insurance process for two-wheeler owners
Types of bike insurance policies
When purchasing a 5-year bike insurance policy, you need to understand the different types of motor insurance available.
Third-Party Liability Insurance
If you are wondering which type of insurance is mandatory for two-wheelers, the answer is third-party coverage. It is the minimum legal requirement for two-wheelers in India under the Motor Vehicles Act of 1988. It provides coverage for injuries, death, or damage caused to a third party or their property due to an accident involving your bike. However, this type of insurance does not cover damages to your vehicle, leaving you financially responsible for any repairs or losses.
Comprehensive Insurance
A comprehensive insurance policy provides wider coverage, including both third-party liabilities and own damages. This policy protects against accidents, theft, fire, natural disasters, and vandalism, reducing financial risks for the policyholder.
While third-party insurance is mandatory, comprehensive insurance is optional. However, it is highly recommended for those seeking complete financial protection. In the event of an accident or unexpected damage, both the insured bike and third-party liabilities are covered.
Choosing between these policies depends on your budget, riding habits, and the level of protection desired.
Benefits of a 5-year third-party insurance policy
Opting for a 5-year bike insurance policy provides several advantages:
Cost savings
The price for 5 years of insurance for two-wheelers may initially appear to be a substantial investment. But in the long run, it is usually more economical than opting for annual renewals. Here's why:
Avoid price hikes
Insurance premiums tend to increase yearly due to inflation, rising claims costs, and increased risks. By committing to a 5-year insurance policy, you lock in the rate for the entire term, preventing these annual premium hikes.
Reduced administrative fees
Annual renewals often come with hidden administrative charges that can add up over time. With a long-term policy, you reduce the number of transactions with the insurer, leading to lower administrative fees overall.
Convenience
The biggest advantage of opting for a 5-year bike insurance policy is its convenience. With a long-term policy, you eliminate the need to renew your insurance every year. Here's how that benefits you:
No annual renewals
With annual policies, you must renew your insurance before it expires. Forgetting to do so can lead to fines and penalties. A 5-year policy takes away this hassle by ensuring you're automatically covered for the next five years, without the constant need for reminders and paperwork.
Less paperwork
Each year, when you renew your policy, paperwork is involved. You need to provide documents, pay premiums, and sometimes even negotiate for a better deal. A long-term policy drastically reduces the frequency of such tasks, saving you time and effort.
Easy management
By purchasing a 5-year policy, you only need to manage one policy for an extended period. Tracking and monitoring your insurance status becomes simpler, as you don’t have to manage multiple annual policies, each with different renewal dates and conditions.
Legal compliance
This is one of the most important reasons to get a 5-year insurance policy for a two-wheeler. According to the Motor Vehicles Act, it is mandatory to have third-party liability insurance for all vehicles, including motorcycles and scooters. The fine for riding a bike without valid insurance is ₹2,000 for the first offense, and ₹4,000 for subsequent offenses, with the possibility of imprisonment of up to three months in both cases as per the Motor Vehicle Act, 2019. Two-wheeler insurance for 5 years helps you stay compliant with the law.
How is NCB calculated on a 5-year policy?
No Claim Bonus (NCB) is a discount insurers provide for not filing claims during the policy tenure. It reduces the 5-year bike insurance price in India. The NCB is calculated as follows:
- 1 year without a claim: 20% NCB
- 2 years without a claim: 25% NCB
- 3 years without a claim: 35% NCB
- 4 years without a claim: 45% NCB
- 5 years without a claim: 50% NCB
For example, if your 5-year bike insurance price in India is ₹10,000, and you don’t file any claims for five years, you could receive a 50% discount on renewal.
Things to check before opting for bike insurance
Now that you know the benefits and importance of motor vehicle insurance, consider the following factors before purchasing bike insurance online:
Bike Insurance Requirement
The first step in selecting the right bike insurance is understanding what coverage is legally required and best for your needs. Are you looking for basic protection or a more comprehensive policy?
A comprehensive policy is recommended if you have a new or expensive bike or you frequently use your bike for commuting in areas with high traffic or harsh weather conditions.
Risk Profile and Driving Habits
Before deciding on the type of policy, reflect on how often you ride, the condition of the roads you travel on, and the environmental conditions you face. Comprehensive coverage is likely better when you ride in areas with higher accident risks or difficult terrain.
Bike Insurance Budget
Make sure that the cost of the bike insurance policy fits comfortably within your budget. At the same time, don’t compromise on the coverage just to save money upfront. Sometimes, opting for a slightly higher premium can provide you with much-needed protection in the event of an accident, theft, or damage to your bike. It’s essential to consider not only the immediate financial impact but also the long-term benefits of having comprehensive coverage. Investing a little more now can potentially save you from significant expenses and stress later on, ensuring you have adequate support when you need it most. Prioritize finding a balance between affordability and sufficient coverage to protect your valuable asset effectively.
Deductibles
A deductible in bike insurance is the amount of money you pay before your insurance company covers the rest of a claim. The deductible is a fixed amount or percentage agreed upon when you purchased the policy.
Consider your financial comfort level when choosing a deductible. If you’re comfortable with a higher upfront cost in the event of a claim, a higher deductible might be the right choice to lower your premium. However, if you prefer more affordable claims with smaller out-of-pocket costs, a lower deductible could be better, despite a higher premium.
Conclusion
So, is bike insurance mandatory for 5 years? Yes, it is. A 5-year third-party insurance policy is a legal requirement for long-term coverage and financial protection. While third-party insurance is mandatory, a comprehensive policy provides better security. Whether you choose third-party insurance or a comprehensive plan, securing five-year coverage is now essential.
Get your bike insured today with Universal Sompo’s bike insurance online options and enjoy comprehensive protection for the next 5 years!
FAQ
Yes, you can switch insurers when renewing the damage portion of your policy. However, third-party coverage remains fixed for five years.
The insurance policy can be transferred to the new owner. Alternatively, you can cancel it and apply for a refund of the unused premium.
Yes, you can purchase an additional own-damage cover even if you already have a 5-year third-party policy.
After the 5-year term, you can renew your insurance with any insurer. You also have the option to switch to a comprehensive policy for better protection.
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