Exploring Bike Loan Insurance Requirements

Exploring Bike Loan Insurance Requirements

Loans by Team Drivio | 9 Sep 2023

If you aren’t sure why you need a bike loan insurance policy in the first place and how the premium is calculated, this article is for you. Check out why your lender might require you to have such a policy in place.

Purchasing a motorcycle naturally gives you a thrilling experience. It’s a dream come true for many enthusiasts. Whether you are a first-time bike owner or a seasoned rider, it’s easy to overlook your motorcycle loan insurance amidst all the excitement. 

While exploring bike loan insurance requirements, you can easily lose your way amidst the plethora of coverage available. On assessing the required coverage, you can get the loan for your newly purchased motorcycle adequately insured. This warrants a worry-free ride, as you protect your investment.

So, read on for understanding motorcycle loan insurance and its various provisions.

What is Motorcycle Loan Insurance?

Before exploring bike loan insurance requirements, it’s crucial to understand what these schemes are. A bike loan insurance or two-wheeler loan insurance is a financial scheme designed to protect both the involved parties. Therefore, it protects you are the borrower as well as the lender against instances of damage, theft, or loss of the bike. In case of any such incident, the respective party can claim adequate benefits to compensate for the loss.

1. Protection for Lenders

The motorcycle loan insurance ensures that the lender can recover the outstanding amount in case the motorcycle is damaged beyond repair or stolen. Remember, when you take a bike loan, the motorcycle itself serves as the collateral. Now, how do you think that the lender can recover their loss if the bike is lost or damaged beyond repair? 

In these circumstances, the bike loan insurance comes to their rescue. The insurance mitigates the risk exposure of the lender.

2. Financial Security for Borrowers

For understanding motorcycle loan insurance requirements, it’s imperative to consider the borrower’s priorities too. As a borrower, you get financial security from these insurance policies. In case of any unfortunate events, having this insurance can help you avoid the burden of repaying the loan.

What Is the Required Coverage in Motorcycle Loan Insurance?

While exploring bike loan insurance requirements, you would be inquisitive about the required coverage. Knowing how much loan insurance you need is of paramount importance. The coverage you choose should be closely aligned with your needs and the potential risks your motorcycle might face.

Here are some crucial elements to consider as you decide the required coverage for your motorcycle loan.

3. Comprehensive Insurance

A comprehensive policy is the foundation for any bike loan insurance scheme. It covers a wide range of perils, including natural disasters, accidents, vandalism, and theft. Having a comprehensive policy ensures that your lender will be compensated if the bike is stolen or severely damaged. 

4. Third-Party Liability Coverage

Like in many other countries, having third-party liability insurance is mandatory in India for motorcycles. This coverage protects you from legal liability in case you inflict injury to any third party or damage properties. 

5. Personal Accident Coverage

A personal accident coverage is not required by law as a mandate, but you might consider having protection in place to manage medical expenses following an accident. This coverage would compensate the rider for sustained injuries or loss of life in case of unfortunate events.

6. Engine Protection

While engine protection is an add-on policy, you may consider having proper coverage in place. In India, the terrain is diverse and road conditions can have adverse effects on the engine of your motorcycle. Engine protection covers the repair or replacement costs if the engine of your bike sustains damage.

7. Zero Depreciation Add-On

This is an invaluable add-on, that ensures that the insurer would reimburse the full cost of replacing the damaged parts of your motorcycle without considering the depreciated value. Unless you have this add-on, you may have to pay a part of the repair costs.

8. Roadside Assistance

With this add-on, owners can get assistance in case the bike breaks down on the road or faces any technical issues. These services include towing, fuel delivery, and minor repairs.

Factors Affecting Bike Loan Insurance Premium

The cost of your bike loan insurance premium depends on several factors:

  • Make and model: If you buy a high-end model, be prepared to shell out higher premiums for your bike loan insurance. This is because, the loan amount would be higher, exposing the lender to a greater risk.
  • Location: Insurance rates largely vary depending on your location. In case you reside somewhere with a high accident or crime rate, banks would require you to have more coverage to secure their loan.
  • Experience and age: Your age and driving experience largely determine the premium you need to pay. Younger and less experienced riders may face higher premiums since they pose a higher risk to the lender.

Tips for Choosing the Right Bike Loan Insurance

Now that you know the factors that can affect your bike loan insurance premiums, check out these guidelines that will help you choose the right policy.

. Compare quotes: 

Don't settle for the first insurance policy you come across. It’s worth shopping around and comparing quotes from multiple insurers. This will help you find the best deal that suits your budget and needs.

. Evaluate your needs: 

Next, evaluate how much insurance the bank or lender wants you to have. Consider your riding habits and the area you live in to negotiate the loan. The value of your motorcycle and the associated risks largely determine the coverage.

. Read the fine print: 

Make sure to check out the terms and conditions of the bike insurance loan at the outset. Take care of the exclusion and claim settlement procedures to avoid unwelcome surprises.

Wrapping up

Choosing the right motorcycle loan insurance policy is an indispensable part of owning a bike in India. While exploring bike loan insurance requirements, evaluate your risk profile as perceived by the lender. Accordingly, have adequate insurance coverage in place to reduce this risk for the lender as well as for yourself. 

While some lenders require you to have a bike loan insurance policy as a part of the loan sanctioning process, others do not. However, it’s for the sake of your own financial safety that you should invest in such a policy.