Motor insurance rules in India explained in simple words: compulsory cover, penalties, claims, NCB and more. Know your duties as an owner. Get a quote today.
- Third-party insurance is compulsory
- Penalty for driving without insurance
- Types of policy you can choose
- Personal accident cover for the owner-driver
- Commercial vehicles need a commercial policy
- Renewal, lapse and NCB
- Selling or buying a used vehicle
- Claim rules to remember
- Simple habits that keep you safe
- FAQs
In India, every vehicle on the road must have at least third-party insurance. This is the law under the Motor Vehicles Act, 1988. If you drive without valid insurance, you can be fined ₹2,000 and/or jailed for up to 3 months for a first offence.
This guide covers the main motor insurance rules every owner should know, in simple words.
Third-party insurance is compulsory
Third-party (liability) insurance is compulsory for every vehicle on Indian roads. This includes cars, bikes, taxis, trucks, autos and electric vehicles.
It pays for injury, death or property damage to another person. Injury or death liability is unlimited. Third-party property damage liability is limited to ₹7.5 lakh.
It does not pay for damage to your own vehicle. For that, you need a comprehensive policy. Learn more on our third-party insurance page.
Penalty for driving without insurance
The Motor Vehicles (Amendment) Act, 2019 sets these penalties:
- First offence: a fine of ₹2,000 and/or up to 3 months in jail.
- Repeat offence: a fine of ₹4,000 and/or up to 3 months in jail.
Apart from the penalty, driving without insurance is risky. If you hurt someone, you may have to pay for the loss from your own pocket. Read our post on the penalty for riding without insurance for more.
Types of policy you can choose
There are two main types.
- Third-party policy: meets the legal need and covers others.
- Comprehensive policy: third-party cover plus own damage cover for your vehicle, with optional add-ons.
Own damage covers accident, fire, theft, natural calamities like flood and earthquake, and man-made events like riot, as per policy terms. See comprehensive insurance for details.
For new vehicles, third-party cover is usually sold for 3 years for cars and 5 years for two-wheelers. Own damage is usually 1 year at a time, though some insurers may offer a longer option.
Personal accident cover for the owner-driver
A compulsory personal accident (PA) cover of ₹15 lakh is there for the owner-driver. This is unless you already have a similar cover. It applies to the owner-driver only, not to passengers or other drivers.
Read our guide on personal accident cover for the owner-driver for more.
Commercial vehicles need a commercial policy
Taxis, trucks, goods carriers, buses, autos and e-rickshaws need a commercial, goods or passenger-carrying policy. A private-car policy is not valid for commercial use.
If you use a private vehicle for business and it is not allowed in the policy, your claim can be rejected. See our commercial vehicle insurance page for options.
Renewal, lapse and NCB
Your policy has an expiry date. If it expires, the vehicle is uninsured from the next minute. The insurer may ask for an inspection before renewing an expired policy.
No Claim Bonus (NCB) is a discount on the own-damage premium for claim-free years. Usual slabs are 20% after 1 year, 25% after 2, 35% after 3, 45% after 4, and 50% after 5 or more claim-free years. It belongs to the owner, not the vehicle. It is usually kept if you renew on time. Insurers usually allow renewal within about 90 days of expiry to keep NCB, but check your policy. NCB is lost if you claim in that year, and it does not apply to the third-party part.
You can renew easily through our renew vehicle insurance page.
Selling or buying a used vehicle
When a vehicle is sold, the insurance policy must be transferred to the new owner. The Motor Vehicles Act gives 14 days to inform the insurer after the transfer. The buyer should apply within the time allowed.
The seller's NCB does not go to the buyer. The seller can use it on a new vehicle. Read our post on transferring insurance and NCB when buying a used vehicle.
Claim rules to remember
Inform your insurer quickly after an incident. Inform the police for theft, major accident, third-party injury or death, and riot. Do not move or repair the vehicle beyond need before the survey.
For theft, file an FIR and inform the insurer. A "non-traceable" report from the police is usually needed before final settlement.
A claim can be rejected for reasons such as:
- Expired policy.
- Drunk driving.
- Driving without a valid licence.
- Using a private vehicle commercially.
- Late intimation.
- Wrong or hidden facts.
- Wear and tear or mechanical breakdown.
Our claim support page can help you at the time of a claim.
Simple habits that keep you safe
- Keep your policy copy on your phone and in your glove box.
- Renew before the expiry date.
- Give correct facts when you buy.
- Choose a fair IDV. IDV (Insured Declared Value) is the market value of your vehicle agreed with the insurer. It is the most you get for total loss or theft.
- Keep your RC and driving licence valid.
To start, visit our faq page or get a quote.
Motor insurance rules can change over time. Your policy document is final, so read it well.
FAQs
Is insurance needed if I rarely use my vehicle?
Yes. Any vehicle on Indian roads must have at least third-party insurance.
Is comprehensive insurance compulsory?
No. Third-party cover is the legal need. Comprehensive cover is your choice, but it protects your own vehicle too.
What happens if I forget to renew?
Your vehicle is uninsured from the next minute after expiry. You may face penalties, and the insurer may ask for an inspection before renewal.
Who must buy the insurance after I buy a used vehicle?
The new owner. The policy must be transferred, and the buyer should apply within the time allowed.
This guide is for information only. Rules and policy terms can change, and the policy document is final. Please read your policy wording.