Is Motor Insurance Mandatory?


In India, the Motor Vehicles Act, 1988 mandates all vehicles to have an active motor insurance policy before plying on the roads. The Act also mandates the registration of the vehicle and possession of a valid driving license along with the motor insurance policy. The motor insurance must necessarily cover any damage to a person or third-party property caused by the vehicle. If a vehicle owner violates the rules laid down by the Act, then the vehicle owner can face serious consequences and/or penalties.

Why is motor insurance mandatory in India?

In India, the last few decades have seen an exponential rise in the number of vehicles on roads. From two-wheelers and private cars to commercial vehicles, every year the numbers are increasing. Further, India being a vast country, has thousands of kilometres of roads that are difficult to maintain. Hence, there has been an increase in the number of accidents or mishaps in the country. According to reports, India has around five lakh road accidents every year! And, every accident is damage to property or person.

Road accidents can be devastating. They can cause a financial strain due to damages caused to the vehicles and/or people involved in the accident. Hence, the government made it mandatory for vehicles to have at least a third-party liability insurance cover before they run on the roads.

Types&Benefits of a motor insurance policy

A motor insurance policy protects against financial losses arising from damages to your vehicle or self during an accident or collision, third-party liability, and damage to your vehicle due to natural or man-made disasters or calamities.

There are different types of motor insurance policies available:

  1. Third-Party Liability policy – this is the mandatory cover that protects you against financial losses arising from damages to a person or third-party property due to an accident or collision.
  2. Own Damage policy – this is an optional cover where the insurer reimburses the expenses arising from repairing the damages to your own car.
  3. Comprehensive policy – this covers own-damage, as well as, third-party liability.

While an accident can be devastating, a motor insurance policy ensures that you do not experience a financial crunch during such testing times. Also, if you drive safely and avoid any accident or collision, then major insurance companies offer a No Claim Bonus (NCB) in the form of a discount on the premium for the following year.

Implications of not buying the mandatory motor insurance policy

The Motor Vehicles Act, 1988, mandates every vehicle to have a third-party liability cover. If a vehicle owner violates this rule, then the following penalties can be levied:

  1. A fine of up to ₹2000 and/or imprisonment for up to three months or community service. The penalty for subsequent offences would be ₹4000.
  2. Suspension of the owner’s driving license
  3. Suspension of the vehicle’s registration

Forgot to renew your motor insurance policy?

We live busy lives, and it is possible that you forget the date on which you were supposed to renew your motor insurance policy. Most insurers offer a one-year validity on motor insurance, and the vehicle owner needs to renew it annually. If you forget to renew your policy and unfortunately meet with an accident before you could approach the company for renewal, then your car will be considered uninsured. Hence, the insurer will not offer any reimbursement, and you will be liable to bear all costs and pay the penalties for driving a vehicle without a valid insurance policy on public roads.

Buy motor insurance online

Whether you want to opt for the mandatory third-party liability policy or the comprehensive cover, you can buy motor insurance online. Major insurance companies like Tata AIG offer a paperless way to buy insurance, making it easier to comply with the mandatory requirement of motor insurance. You can also choose add-ons or riders based on how and where you use your vehicle to ensure that you are comprehensively protected against any financial losses due to an accident or mishap with your vehicle. Some add-ons to consider are:

  1. Zero Depreciation Cover
  2. Engine Protect
  3. Tyre Protect
  4. Roadside Assistance
  5. Return to Invoice
  6. Key Replacement, etc.

The process of buying motor insurance online is simple:

  1. Login to the insurer’s website
  2. Choose the type of cover you want
  3. Select add-ons
  4. Fill the application form and provide details about your vehicle
  5. The insurer will calculate the premium payable for your selected choices
  6. Make an online payment of the premium amount
  7. Receive a copy of the policy document at your registered email id

Summing Up

Remember, traffic personnelare authorized to stop you anytime and ask to check your car insurance papers. They can do this without reason, and you are required to present it to them on demand. Hence, ensure that you always carry a copy of your motor insurance policy, vehicle registration, and other important papers while on the road.

Post Author: Sophie Toby Hall

A former car magazine editor, Sophie’s blog offers in-depth car reviews, industry trends, and maintenance tips. Her breadth of knowledge makes her posts invaluable for both car enthusiasts and everyday drivers.