Motor insurance is not just paperwork. In an accident, it provides financial protection to you and to others on the road. In India, there are two main kinds of motor insurance: third party insurance and comprehensive insurance. Many people either skip a cover they need or pay for one they do not need, simply because the difference is not clear. The insurance sector is regulated by the Insurance Regulatory and Development Authority of India, or IRDAI.
What third party insurance is
Section 146 of the Motor Vehicles Act 1988 says no motor vehicle can be used in a public place unless there is a policy of insurance covering third party risks. A third party is anyone other than the vehicle owner and the insurer. If your vehicle injures or kills another person or damages their property, the legal liability is paid from this policy. Driving without valid insurance is punishable with a fine under the Act.
Third party insurance does not cover damage to your own vehicle. If your car is damaged in an accident, stolen or ruined in a flood, this policy will not pay for repairs. Third party premiums are fixed by government notification based on vehicle category and engine capacity, so they are broadly the same across insurers.
What comprehensive insurance is
A comprehensive policy combines third party cover with own damage cover for your vehicle. It covers loss or damage due to accidents, fire, theft, natural calamities such as floods and earthquakes, and events such as riots, subject to policy terms. The premium depends on the insured declared value of the vehicle, its model, age and the city, so it varies between insurers.
Since 2019, IRDAI has allowed standalone own damage policies. Owners who already have a long term third party policy can buy own damage cover separately, from any insurer.
Long term third party cover on new vehicles
Following a 2018 direction of the Supreme Court, buyers of new cars must take three year third party cover and buyers of new two wheelers five year third party cover at the time of purchase. That is why new vehicles often come with long term third party cover and one year own damage cover. The own damage part must be renewed every year.
Add ons and the no claim bonus
Comprehensive policies can include add ons such as zero depreciation, engine protection, roadside assistance and personal accident cover for the driver or passengers. These raise the premium, so choose based on need. If you make no claim during a year, you get a no claim bonus discount on the own damage premium, and it stays with you even if you switch insurers.
Buying and claiming
Before buying, read the insured declared value, deductibles, network garages and claim process. After an accident, inform the insurer promptly, take photographs and file a police report where needed. For theft, an FIR is essential. If your complaint is not resolved, you can approach IRDAI’s Bima Bharosa portal and the Insurance Ombudsman.
Compare policies on what they actually cover rather than only on price. A cheaper policy may carry a higher deductible, exclude certain parts or have fewer network garages near you. Cashless repair at a network garage saves you from paying upfront, while repairs at other garages are usually reimbursed after you pay. Disclose modifications such as a CNG kit, because undisclosed changes can lead to a rejected claim.
Renew on time, because a lapsed policy can mean a fresh vehicle inspection and the loss of your accumulated no claim bonus after a certain period. Keep a digital copy of the policy, which is accepted when checked by traffic authorities.
In short, third party insurance is the legal minimum, while comprehensive insurance also protects your own vehicle. Some owners of older, low value vehicles choose only third party cover, while comprehensive cover is generally preferred for new vehicles. Check the IRDAI website for current rules.
Also Read: Old vs New Tax Regime: Slabs, Deductions and How to Choose the Right One
Source: Insurance Regulatory and Development Authority of India, Motor Vehicles Act 1988, India Code, Bima Bharosa, IRDAI grievance portal
