Two-wheeler insurance is more than just a formality—it’s a legal necessity and an essential part of being a responsible rider. Every vehicle on Indian roads must have at least a third-party insurance policy in place, which covers liability for damage or injury to a third party. However, many policyholders are unsure about how premiums for 2 wheeler insurance 3rd party are actually calculated.

While comprehensive bike insurance can vary widely in cost due to customisation, add-ons, and vehicle conditions, third-party premiums follow a standard structure governed by the country’s insurance regulator. This post breaks down the key elements that influence third-party insurance pricing, helping you better understand where your premium comes from.

Factors Affecting Third-Party Bike Insurance Premiums

1. Engine Capacity of the Bike

The most important factor in determining third-party premiums is the engine size, measured in cubic centimetres (cc). The Insurance Regulatory and Development Authority of India (IRDAI) has fixed premium rates based on these engine capacity brackets:

• Up to 75cc – These are small, low-powered vehicles often used for short-distance commuting. Premiums are the lowest in this bracket.
• 76cc to 150cc – This covers most standard commuter bikes, which are popular in both urban and rural areas.
• 151cc to 350cc – Typically mid-range bikes that offer more power and speed with slightly higher associated premiums.
• Above 350cc – These include powerful performance bikes or touring motorcycles and attract the highest third-party premiums.

Higher engine power generally corresponds to increased speed and risk, which raises the potential for third-party liability. IRDAI revises these rates annually based on road data, accident frequency, and claim trends.

2. Type and Duration of the Policy

The length of your insurance term also plays a role in premium calculation. As per IRDAI guidelines, all new two-wheelers must be issued a 5-year third-party policy at the time of purchase. This one-time premium ensures continuous coverage for the mandated period and helps reduce policy lapses.

For older bikes, or after the five-year term is complete, you can switch to annual renewals. While yearly policies offer flexibility, long-term plans often provide savings and shield you from future hikes in regulated premium rates.

3. Regulatory Pricing by IRDAI

Unlike comprehensive insurance, where providers can set premiums competitively, third-party premiums are regulated and standardised. IRDAI publishes updated premium tables every year, ensuring a uniform cost across all insurers. This allows customers to focus on service quality and reliability rather than shopping for pricing advantages in this category.

Factors influencing the IRDAI’s adjustments include:

• Claim volumes across the country
• Cost of settlements and legal compensation
• Overall road safety data and accident patterns

As a result, the base premium for third-party insurance remains consistent regardless of the insurance provider.

4. Mandatory Personal Accident Cover

Another key component added to the 2 wheeler insurance 3rd party is the Personal Accident (PA) cover for the owner-driver. This cover provides financial assistance in case of accidental death or permanent disability while riding the insured two-wheeler. It is a compulsory add-on, though the premium for PA cover is a fixed amount as determined by the regulator.

While not technically part of third-party liability coverage, it appears in the final bill and affects the total amount you pay when purchasing or renewing your policy.

5. Goods and Services Tax (GST)

As with most financial products and services in India, GST is applicable on two-wheeler insurance. The final premium you pay is the sum of:

• Regulated third-party premium (based on engine capacity)
• Personal Accident cover
• The GST amount

No insurance provider is permitted to accept cash payments for policy purchases or renewals. All premium payments must be made through approved digital or banking channels.

6. Use of Online Premium Calculators

To streamline the purchase and renewal process, most insurers now offer online premium calculators. These tools help riders estimate their insurance premium quickly by entering details like:

• Engine capacity
• Bike make and model
• Year of registration
• Policy duration

Conclusion

Understanding how your third-party bike insurance premium is calculated can make you a more informed and financially aware policyholder. By knowing what affects your premium—engine size, policy duration, government regulation, and taxes—you can make better decisions when choosing your insurance.

While several providers offer third-party insurance, it’s essential to choose a company that offers a straightforward online process, trusted customer service, and full transparency. Leading insurers such as Bajaj Allianz General Insurance Company, for instance, offer accessible tools and easy policy management that make the insurance process smooth and hassle-free.

*Standard T&C Apply

*Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.