• Two Wheeler Insurance Glossary

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    Accidental Bodily Injury:

    Injury or damage occurred to the body as the result of an accident

    Accidental Death Benefit:

    In a motor insurance policy, if the policy holder dies due to an unfortunate accident, the nominee will be paid a certain amount called the death benefit as per the policy capacity.

    Agent:

    An agent is a person who acts as a bridge between the customer and the insurance company for financial transactions. He/she is an individual who sells insurance policies to customers from the insurance company. they can be two types:

    • Independent Agents: They do not serve anyone company through a contract. They sell insurance policies of multiple insurance companies (usually more than 2) and services of the company to the clients or customers. They are paid a certain percentage of the premium amount and they also get paid by the insurance company for the service.
    • Captive Agents: They sell insurance policy of one company to customers. They are employed by a particular insurance company and sell the policy of that one company. Their services are rewarded in form or commission or salary.

    Annual Premium:

    It is a premium amount that is paid by the policyholder towards the insurance in one single amount every year to keep the insurance active.

    Basic Limit:

    It is the minimum premium amount that is decided by the law or IRDAI or the insurance company itself. This type of policy is usually a liability only policy. Any individual can pay the minimum limit to purchase an insurance.

    Beneficiary:

    He/she is an individual who is liable to receive any benefit of a policy, retirement account benefit or property legally.

    Bodily Injury :

    Physical injury, including sickness, mental injury, shock or death caused in an accident .

    Broker:

    He/she is a middleman who represents an insured in the solicitation, negotiation or procurement of contracts of insurance, and who may render services incidental to those functions.

    Breach of Condition:

    If a policyholder brakes any of the terms or clause in an insurance contract, the insurer will nullify the contract with immediate effect or the claims made under such breach will be rejected.

    Cancellation:

    It is the discontinuance of a insurance policy by the policyholder or the insurance company before its expiry date.

    Compulsory Deductible:

    The amount that is fixed by the insurance company for every claim that a policyholder makes, is the compulsory deductibles. It is a mandatory amount that the policyholder has to bare and the remaining will be paid by the insurer. The minimum compulsory deductible for two-wheelers less than 350cc is Rs.50 and for bikes/scooters above 350cc is Rs.100. If the vehicle is in bad condition or the damage is huge, then the compulsory deductible will also be higher.

    Claim:

    It is an application or notification submitted by the policyholder to the insurance company for payment due of an repair or damage that is covered under the terms and conditions of the policy.

    Compulsory Insurance:

    It is minimum insurance coverage that every individual is required to have according to the law and usually this refers to a third-party liability policy.

    Constructive Total loss

    It is the cost incurred to repair any part of the vehicle or property which is more than the market value of the item

    Coverage:

    It is the maximum capacity of protection provided in the insurance policy for the given amount of premium.

    Comprehensive coverage:

    A comprehensive plan is what every two-wheeler owner should prefer as it protects your vehicle form many unforeseen situations. A comprehensive two-wheeler insurance provides cover against own damage, third-party liabilities, accidents, natural calamities like, storms volcanoes, floods, etc. and man-made calamities like riots, civil protests, terrorists attacks, thefts, burglary, robbery, etc. The premium for this cover depends on cubic capacity, make and model of the vehicle, etc. You can choose either annual or long-term cover for the policy. There are few limitations for this cover like the regular wear and tear of the vehicle, accident caused due to driving while intoxicated with drugs and alcohol, damage due to nuclear war, tyres damage and fiber parts are not covered.

    Capital Sum Insured:

    It is the maximum sum insured to a person by the insurance company in the event of death, total loss or damage for the insured property.

    Deductibles:

    It is a part of the claim for motor insurance policies, which is to be paid by the policyholder and the remaining amount of the claim will be taken care by the insurance company. There are two types of deductibles:

    • Compulsory deductible
    • Voluntary deductible

    Annual Premium

    t is a written document of an insurance policy which specifies the declarations, agreements, exclusions, terms and conditions of an insurance policy.

    Financial Loss:

    The legal liability for financial loss which does not include any bodily injuries or total damage of the property.

    Floater policy:

    It is a type of insurance policy which covers movable property and provides additional cover specified other than the normal inclusions. This policy can be brought for any kind of asset.

    Grace Period:

    It is the additional time provided by the insurance company for the renewal of the policy and to pay the premium due. The policyholder can pay the premium during this period without the fear of policy lapse.

    Insurance Regulatory Information System:

    It was introduced by the National Association of Insurance Commissioners in 1974, to further classify the insurance companies which needs a regulatory review.

    Insured Declared Value:

    Insured Declared value or IDV is generally known as the market value of the vehicle. It is the maximum sum assured by the insurer that is calculably fixed which will be paid to the policyholder in the event of theft or total loss of the two-wheeler. If the insured two-wheeler has been in an accident, then the IDV is a form of compensation paid to the policyholder by the insurer. The IDV will be reduced as the two-wheeler ages. IDV is calculated on the current value of the bike, and not on the purchase value of the bike/scooter.

    IDV = (Manufacturer’s listing price – Depreciation) + (Accessories and extra fittings if any – depreciation)

    Joint-and-Several Liability:

    It is a legal principle which allows the injured person in an accident or incident to claim for the compensation for the damages occured from the insured person regardless of the degree of negligence by either.

    Lapse:

    it is the termination or cancellation of the insurance policy due to failure in renewing the policy on time by paying the premium amount.

    Market value:

    It is the current value of your vehicle or property which is calculated after deducting the depreciation percentage. It is value at which the asset would sell in the market.

    Maximum Probable Loss:

    It is the maximum loss that can occur to the insurer on a given insurance policy. It is often associated with properties, vehicles, fire insurance, etc.

    National Association of Insurance Commissioners (NAIC):

    It is the association of state insurance commissioners where every member tries to promote the purpose of uniformity of insurance regulation, develop model laws for passage by state legislatures and monitor insurance solvency.

    No-Claim Bonus:

    No-claim bonus is a reward given to the policyholder by the insurer in form of discount percentage for every claim free year on your two wheeler insurance. NCB can be easily transferred even if the policyholder is changing the insurer. No-claim Bonus is one of the popular two wheeler insurance optional cover as it protects the discount from getting lapsed. NCB is a benefit for the policyholder and not the insured bike/scooter. But if the policy is not renewed on time, NCB will lapse. NCB is available only for the comprehensive policy and not the liability policy. No-claim bonus under any circumstance cannot be transferred from one person to another.

    Number of Years % of NCB
    No claims made during first year or at the time of renewal 20%
    No claims made during second year or at the time of renewal 25%
    No claims made during third year or at the time of renewal 35%
    No claims made during fourth year or at the time of renewal 45%
    No claims made during fifth year or at the time of renewal 50%

    Peril:

    It is an incident or an event which causes a loss to the policyholder.There are a variety of perils which is covered under the policy and some excluded from the policy.

    Premium:

    It is the sum of amount paid by the policyholder to the insurer to keep the insurance active.

    Product Liability:

    It is a legal liability caused to the manufacturer, distributor, etc. of a product which ended-up causing damage or injury to a person from the usage of the product.

    Policyholder:

    An individual who pays a certain premium amount to the insurer and inreturn gets a insurance policy protection for his needs.

    Personal accident cover:

    If the policy holder is not satisfied with the accidental cover provided with the comprehensive two-wheeler insurance plan, then he/she can purchase this add-on personal accident cover. Few insurers provide personal accident cover as an added benefit along with the comprehensive policy but not all the insurer provide this benefit. Depending upon the policy purchased, the owner of the insured vehicle can utilize up to Rs.2 lakh for personal accident medical expense.

    Policy period:

    From the date of policy activation to the date of expiry is known as a policy period. It can be annual or long-term. An annual policy is valid for 12 months and the long-term policy is valid for either 48 months or 60 months depending on choice of term purchased.

    Renewal:

    Every year, the insurance policy has to be renewed after the expiry date to keep the policy in force and active. The premium amount has to be paid as applicable.

    Surveyor:

    He is an authorized personnel appointed by the insurer or any other government official who examines the insured item (vehicles, buildings, etc) and reports the condition of the item to the insurer. Post which the claims or renewals of the policy will be completed.

    Third-party cover:

    This policy is also known as the liability only cover and it provides protection only to the damages or injuries occurred to third-party person or property and it does not provide any cover to the vehicle or the owner. It is a mandatory and minimum cover required and it is regulated by the IRDAI as well. The premium for this cover is fixed every year by the IRDAI.

    Two wheeler Insurance Policy:

    A two wheeler insurance policy is an agreement between two parties where one of them in the insurance company and the other is the policy buyer. The agreement basically says that the insurance company will provide protection to the vehicle of the policy buyer with certain limits and the policy buyer agrees to pay a sum of amount in form of premium every year. A bike insurance policy is the mandatory document that ever two-wheeler must have under the Motor Vehicle Act of 1989. Not insuring your vehicle with proper coverage can lead to a huge loss in the event of repair for damage or accidental damage. If caught by the police on a random checking, you will be penalized with a minimum amount of Rs.1, 000 or could be jailed for 3 months and the Driving License will also be canceled.

    Valuation:

    It is the process of estimating the value of a asset or item for further process.

    Vicarious Liability:

    It is the liability arising out of a situation where one person is held accountable for the actions of another.

    Void:

    The insurance policy will no longer be valid.

    Voluntary Deductibles:

    Voluntary deductible is an amount limit that is chosen by the policyholder, where he/she decides to pay from their own pocket in case of a claim. The voluntary deductible is completely depends on the affordability of the policyholder. If the policyholder chooses higher limit of voluntary deductibles, then he/she can lower the premium amount. If the policyholder claims for reimbursement or cashless claim, please note that the policyholder will be paying both compulsory and voluntary deductibles amount.

    Wear and Tear:

    It is a formal term for depreciation of an item caused due to its usage.

    Zero Depreciation cover:

    A zero-depreciation cover protects the vehicle against the depreciation value while claiming for two-wheeler insurance policy. This is an add-on cover can be purchased for few extra premium. If the policyholder has this cover, then the insurer will pay complete claim value of the bike without taking depreciation into consideration. The usual depreciation value is up to 40% for two-wheelers, but with this cover this percentage will not be taken into account for calculation of renewing the policy or for claim settlements. This cover also has few limitation like damages caused to parts like tyres, gas kits, fuel tank, mechanical or electrical breakdowns, normal wear and tear, etc. This policy can only be availed twice during a policy year. To avail nil-depreciation, you have to get the two-wheeler repaired only with the network of garages of the insurer. This policy cannot be availed if the bike is stolen or completely damaged.

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