Insurance in India: A Practical Guide
Motor Insurance and Third-Party Cover
Why third-party motor insurance is mandatory in India, what own-damage cover adds, and why so many vehicles on Indian roads are uninsured.
Every vehicle on Indian roads must have third-party insurance, under the Motor Vehicles Act.
Third-party insurance
- Covers legal liability for injury, death or property damage caused to others by your vehicle.
- Mandatory; driving without it is an offence.
- Premiums are set by the regulator based on vehicle type and engine size.
Own-damage cover
- Covers damage to your own vehicle from accidents, theft, fire or natural disasters.
- Optional, but included in comprehensive policies.
Add-ons
- Zero depreciation: full claim without deducting for parts’ wear.
- Engine protection.
- Roadside assistance.
No claim bonus
Drivers who don’t claim get a discount on own-damage premiums at renewal, which can reach 50 percent over several years.
The uninsured problem
Studies and industry estimates suggest a large share of vehicles on Indian roads, especially two-wheelers, lack valid insurance, as owners let policies lapse after the first year. Accident victims may struggle to get compensation.
Solutions
- Linking insurance to vehicle registration databases.
- FASTag and traffic cameras detecting uninsured vehicles.
- Long-term policies at purchase: since 2018, new cars and two-wheelers must have multi-year third-party cover.
- A government fund for victims of hit-and-run accidents.
A scooter rider without insurance injures a pedestrian. The pedestrian's medical bills are high, and the rider must pay personally. With third-party insurance, the insurer would have paid.
Third-party cover pays for harm to others; own-damage cover protects your vehicle.
- Third-party motor insurance is mandatory in India.
- Own-damage cover is optional and protects your own vehicle.
- A large share of vehicles, especially two-wheelers, lack valid insurance.
- Multi-year cover at purchase and database checks aim to fix this.
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