A Comprehensive Guide for Second-Hand Bike Insurance

Introduction

Rajesh is a college student who bought a second-hand bike due to budget constraints. He didn’t buy insurance because he assumed it wasn’t necessary for an older bike. One day, Rajesh crashed his second-hand bike into a truck and faced a huge compensation claim. Do you know Rajesh could have been saved from such a huge financial burden if he had bike insurance?

In this blog, discover all about second-hand bike insurance and how to obtain the ideal insurance value for your bike.

What is Second-hand bike insurance?

Second-hand bike insurance or simply bike insurance for your second-hand bike covers the insured person’s (registered owner of the bike) legal liability if they are sued or held legally liable for injuries or damage done to a third party. With comprehensive coverage, the insurer also pays for the damages to your second-hand bike. 

Importance Of Insurance For Second-Hand Bike

According to the Motor Vehicles Act 1988, every bike owner must have at least a third-party insurance policy. Failing to do so can result in a fine of up to ₹1000 (1 Year plan), ₹2000 or imprisonment of up to 3 months or both. Also, it protects you from financial and legal liabilities in case of accidents, theft, or damage to your bike due to natural or man-made calamities. 

Add-on Covers For Second-Hand Bike

The add-on covers for second-hand bike insurance provide additional coverage apart from liabilities covered by comprehensive and third-party insurance plans. Some of the add-on covers that could be useful for you are:

• Return to Invoice Cover (RTI) – With RTI cover, your insurer will pay up to the original invoice value of your bike, including registration charges and road tax. 

• Nil or Zero depreciation cover – The Nil or Zero depreciation cover will ensure that your insurer will pay for the bike parts without considering depreciation. 

• Engine protection cover – If your second-hand bike needs a new engine, you can claim the repair bill along with the cost of the engine when you have an engine protection cover. 

• Breakdown assistance – Second-hand bikes might become unreliable and vulnerable due to wear and tear. With breakdown assistance cover, your insurer will immediately assist you in getting your bike to the nearest garage. 
• Consumables cover – Cost of  consumables like nuts and bolts, engine oil, screws, etc can increase your repair bill from a few hundred to thousands. Consumables add-on cover will cover these expenses as well. 

How To Calculate The Right Insurance Value Of Your Second-Hand Bike?

While calculating insurance premiums, insurers evaluate your bike’s Insured Declared Value (IDV). This IDV is the highest compensation you can receive from your insurer in case of total vehicle damage, theft, or loss. 

The formula used to calculate IDV is :

IDV = (Bike’s listed market price – depreciation cost) + (cost of bike accessories – depreciation value of parts)

For second-hand bikes, depreciation cost plays a major role in determining IDV. Vehicles with higher IDV get better financial protection from insurance providers. Generally, insurers calculate depreciation cost based on the following table:

In Rajesh’s case, he bought a bike worth ₹50,000 at ₹40,000 from his friend. Since the bike was 2 years old, its value had depreciated by 20%. Now, Rajesh has used that bike for 2 more years, after which he has decided to sell it. Considering only depreciation as the factor reducing the bike’s value, the new value stood at ₹30,000. So, if he claims for any insurance, he would ideally be reimbursed as per the depreciated value of his bike and parts. This is where insurance and especially having zero-depreciation can come in handy in case of a second-hand bike. It will ensure you get the actual value of the bike or bike parts while claiming your insurance.

Things to take care of while buying insurance for old bikes

As a second-hand bike involves a previous owner, you must remember the following points:

• Get Registration Certificate (RC)  under your name as the new owner. 
• Ensure that the Insured Declared Value (IDV) matches the current market value of your bike. If you use your bike daily, consider buying the maximum insurance coverage you can afford.
• If you have an existing bike insurance for your old bike that you sold recently, transfer the No Claim Bonus (NCB) to your new insurance policy to get the benefit. (NCB is not associated with the bike but is related to the bike owner). 

Key Takeaways

Second-hand bike insurance is a must-have for anyone who owns a used bike. It provides legal and financial protection against various risks and uncertainties that can arise while riding a bike. It also offers some add-on covers that can enhance the coverage and benefits of the policy.