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Bike Insurance Glossary: Definitions and Common Terminologies

Team AckoJan 17, 2024

Bike insurance can sometimes leave you confused with its terms and words that are technical and complex to understand. Such specialised terms are popularly referred to as jargon. Before you decide to buy bike insurance for your bike or scooter, it is vital that you understand these complex terminologies. In this article, we have simplified bike insurance jargons so that you can make an informed choice while shopping for the right insurance coverage for your two-wheeler.

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Glossary on two-wheeler insurance terms in India

Glossary on two-wheeler insurance terms in India

Understanding the meaning of bike insurance terms and complex words is not challenging. Refer to the following definitions of the different types of jargons used in bike insurance to understand two-wheeler insurance terms better.

1. Premium

The premium is the amount you pay for your two-wheeler insurance policy every year. The bike insurance premium is paid periodically to the insurer by you for covering specific risks. For insuring these risks, the insurance provider charges a fee called the premium. The bike insurance premium calculation is based on several factors. These factors include the make and model of the two-wheeler, year of manufacture, location, etc.

2. Insured

Bike insurance is a means of financial protection from damages or losses incurred by the vehicle. While the entity which offers the insurance coverage is called the insurer, the person/entity/asset covered under the policy is called an insured. In bike insurance, the covered two-wheeler is the insured asset.

3. Insurer

As mentioned above, the entity which offers financial protection against damages or losses to the insured asset is known as the insurer. For taking the risk of providing financial security to the insured vehicle, the insurer charges a premium that needs to be paid within the stipulated renewal due date.

4. Own Damage cover

Own Damage bike insurance cover (OD) is a component of the bike insurance plan that protects you against repair and replacement costs when your bike is damaged due to an accident, explosion or fire, natural or man-made calamities, and even damages that are beyond repair. It is also insured against bike or scooter theft.

5. Third-party Insurance

Third-party insurance or Third-party Liability Plan protects you against damages or losses caused to the third party by the insured bike. This type of bike insurance is mandatory as per law. It covers financial and legal liabilities incurred due to vehicle damages, physical injuries, accidental death and property damage of a third party. Since it is mandatory, not insuring your motorbike or scooter with the Third-party Bike Insurance Policy shall lead to penalties by the traffic police.

6. No Claim Bonus (NCB)

As the name suggests, the insurer (ACKO) rewards you with a discount for not raising any claims during the policy period. This discount is referred to as NCB in bike insurance. The discount is cumulative and increases with each consecutive claim-free year. It can go up to 50% if you don’t raise claims for five consecutive years. The discount also encourages you to ride safely and not submit claims for minor damages.

7. Zero Depreciation cover

This add-on cover to the Comprehensive insurance policy covers the depreciation of the replaced vehicle parts of the insured two-wheeler. The add-on cover enables you to receive a higher claim amount since you will get the total value of the damaged vehicle part. It is also popularly referred to as Nil Depreciation cover. You can buy the add-on while purchasing or renewing the Comprehensive insurance policy.

8. Insured Declared Value (IDV)

The term IDV in bike insurance is the approximate market cost of your two-wheeler. It is the base value used to calculate the premium of your Comprehensive insurance plan. Suppose your bike or scooter is considered a ‘total loss’ after an accident or in case it is stolen. During such circumstances, the compensation amount is equal to the IDV after considering the required deductible and depreciation.

Remember, the higher the IDV, the higher the premium and the lower the IDV, the lower the premium. However, it is recommended that you choose the right IDV for the right compensation, and not base your decision solely on the premium.

9. Compulsory deductible

A compulsory deductible in bike insurance is a portion of the claim amount you need to pay from your pocket. ACKO settles the claim after deducting the compulsory deductible amount. All motor vehicle owners in India must bear the compulsory deductible at the time of claim settlements. For example, if the repair bill of the damages to your bike repair is Rs. 3,000, and the applicable compulsory deductible in your insurance policy is Rs. 100, then we deduct Rs. 100 and pay the remaining claim amount after considering the required depreciation and terms and conditions of the policy.

10. Voluntary deductible

While the compulsory deductible is mandatory as per law, the voluntary deductible is optional. It is an amount you decide to pay from your pocket at the time of claim settlements. Since you opt for this type of deductible in bike insurance, the premium reduces. But, the higher the voluntary deductible, the higher the out-of-pocket expenses.

Suppose you have opted for a voluntary deductible of Rs. 500 along with the mandatory compulsory deductible of Rs. 100. In such a scenario, in case of damages to your bike due to an accident, you raise a claim against your policy for Rs. 3,000. Rs. 600 has to be paid from your pocket, while the rest of the claim amount is settled by the insurer after considering the required depreciation.

11. Add-on cover

Add-ons are additional insurance coverages for specific damages or losses or even assistance in the form of emergency roadside assistance. The add-on covers in bike insurance enhance the standard comprehensive insurance plan’s coverage for an additional premium.

You can choose from add-ons such as Zero Depreciation cover, Engine Protection cover, Roadside Assistance cover, etc. Please check with the insurer for the availability of the add-ons before you opt for the same.

12. Personal Accident cover

The Personal Accident cover (PA) in bike insurance is a mandatory cover that you should purchase while buying or renewing your bike insurance policy. The cover protects you financially against physical injuries or demise arising from an accident.

The cover also provides financial protection in case of permanent disability. You can get up to Rs. 15 lakhs as compensation through the PA cover. You need to buy only one PA cover if you own more than one motor vehicle in India.

13. Legal liability

The term ‘legal liability’ in bike insurance is used when your insured vehicle is responsible for third-party liabilities. Your insurer will take care of legal liabilities arising from third-party injury or property damage.

14. Cashless garage

If your insured bike is damaged due to an accident, you can repair it at your insurer’s authorised/network garage. The insurance provider will coordinate with the network garage and settle the repair bill directly. You may have to pay the required deductibles and charges. This type of garage is known as a cashless garage.

15. Endorsement

Suppose changes are required to your personal information or to the terms and conditions of your bike insurance policy, you must make an endorsement in your bike policy to reflect the changes. Your policy document must always be accurate so that you enjoy the policy’s benefits. Hence, if there are amendments, deletions or corrections, you must get the endorsement done with your insurer to reflect the changes.

16. Break-in insurance

Usually, your bike insurance is an annual contract that must be renewed on the due date so that you continue to enjoy the benefits of the plan. If you miss your renewal due date, your policy will have a break. However, when you renew the lapsed bike insurance policy, the period between the due date and the date you renewed the policy is known as the break-in period in bike insurance.

17. Proof of loss

Proof of loss is a formal document that you shall submit with your insurer that initiates the claim process after the damages or losses incurred by the insured bike. The document provides the insurer with specific details of the incident, such as its cause, consequential damages and financial impact. Documents such as the First Information Report (FIR), required in case of theft, are known as ‘proof of loss’.

18. Roadside Assistance (RSA)

Imagine being stranded with your bike in the middle of a highway due to a flat tyre or battery malfunction. The experience can leave you frustrated, and you may have to look for a garage to get your vehicle repaired. The Roadside Assistance cover is an add-on that offers specific emergency assistance during such situations. Some of the services provided through the RSA cover are towing, fuel fill, battery jump-start, fixing a flat tyre, etc.

19. RTI cover

RTI cover in bike insurance or Return to Invoice cover is an add-on cover and can be bought with the comprehensive insurance plan. It allows you to receive compensation equal to the bike’s invoice value, the original purchase invoice of the vehicle. In case of theft or damages beyond repair due to an accident, the insurer will pay the actual purchase invoice value instead of the IDV of the insured vehicle.

20. Engine Protection cover

The standard comprehensive insurance policy provides financial protection against accidental damages to your vehicle. It also provides coverage in case of vehicle theft or total loss. However, it does not cover damages to the engine and gearbox. The Engine Protection cover for bike is an optional add-on cover you buy when you purchase or renew the standard plan. It covers repairs and replacement costs of the engine and its parts.

21. Anti-theft device

Devices that prevent your bike from being stolen are known as anti-theft devices. Installation of an ARAI (Automotive Research Association of India) certified anti-theft device to your bike or scooter can reduce the premium of your bike insurance plan since you are making efforts to secure your vehicle.

22. Grace period

A bike insurance policy can have a validity of one or three years, after which it expires. After a bike insurance policy expires, some insurers allow you to renew the policy within 30 days without inspection. This is called a grace period. The duration of the grace period depends upon the terms and conditions of the insurer.

22. First, second and third-party

In bike insurance the policyholder i.e. the owner of the bike is the first party. The insurance company that insures the bike is the second party and any other person affected by the insured bike is called the third-party.

23. Inspection

Insurers might take a look at your bike before issuing an insurance policy. Bike insurance Inspection is also conducted if your insured bike meets with an accident. This type of insurance is conducted to understand the scope of damage to your bike.

24. Depreciation

Depreciation is the reduction in the monetary value of your bike. A bike depreciates with time due to wear and tear, and from usage. At the time of claim, an insurer will subtract the amount of depreciation before releasing the claim amount.

25. Third-party Liability cover

This is a type of bike insurance policy which covers the cost of repairing damages caused to the third party because of the insured bike. This policy does not cover the cost of repairing the insured bike.

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