Why Motor Insurance Is Mandatory in India: Legal Rules & Benefits?

Riding without motor insurance? Do you know that this is illegal in India under the Motor Vehicles Act?

Yes, for this offence, you can face a ₹2,000 legal fine, or imprisonment up to 3 months. It is mandatory that you secure at least a third-party liability motor insurance, which is for all vehicles to ride on Indian roads. 

Beyond penalties, motor insurance provides coverage for natural disasters, theft, own damage and covers medical bills, vehicle repair or part replacement costs.

Still on the fence? Unlock how a simple motor insurance can legally and financially protect you and your wallet daily. 

Why is Motor Insurance Mandatory in India?

1.     Avoid Legal Complications

In India, having third-party car insurance is compulsory under the Motor Vehicle Act of 1988. Driving a bike without insurance can result in fines or suspension of your driving license. So, buying motor insurance online for your two-wheeler or car ensures that you comply with government regulations and avoid penalties.

2.     Drive with Confidence

Purchasing motor insurance provides peace of mind. Motor insurance provides medical care for any third-party injury or repair of damaged property, which absolves you from financial obligations. With comprehensive coverage, you can enjoy driving without worrying about unforeseen circumstances.

3.     Financial Protection

Accidents can happen anytime, and the resulting damages can be costly. Car insurance shields you from financial liability for third-party damages or repairs to your vehicle. Buying insurance ensures that you are protected from the start.

You know, car insurance premiums vary depending on factors like vehicle age and type. Purchase car insurance online, so you can compare quotes, explore options, and take advantage of discounts to get affordable rates.

What are the New Legal Rules of Motor Insurance in India by IRDAI?

The Insurance Regulatory and Development Authority of India (IRDAI) updates motor insurance rules and regulations. Stay informed and up-to-date with the latest changes in the guidance of motor insurance.

1.     Flexibility in Policy Period

Earlier, new car owners were required to purchase a long-term insurance policy with a minimum period of three years. Now, they can opt for an annual standalone Own Damage car insurance policy along with a 3-year Third-party Liability policy.

2.     Standardised No Claim Bonus Grid

IRDAI has introduced a standardised grid for No Claim Bonus (NCB) to ensure clarity and consistency across insurance companies. This means all insurers will follow the same NCB structure.

3.     Cancellation of RC in Total Loss or Theft

In cases of total loss or theft, your vehicle’s Registration Certificate (RC) will be cancelled as per new guidance. Policyholders must submit the RC to their insurer.

4.     Standard Deductibles

IRDAI has introduced "Standard Deductibles" with fixed amounts. For example, a ₹1,000 deduction for cars with engine capacity up to 1500cc and a ₹2,000 deduction for cars with engine capacity above 1500cc.

5.     Mandatory Passenger Insurance Cover

According to IRDAI recommendations, it is mandatory to buy passenger insurance coverage with motor insurance. All passengers in the insured vehicle can have a minimum insurance cover of ₹25,000.

What are the Benefits of Having a Motor Insurance Policy?

1.     Protection against Third-Party Liability

Car insurance safeguards you against financial losses resulting from damage or injury to others. Most motor insurance compensates third-party claims in case your car or bike is responsible for the bodily injury or property damage of a third party.

2.     Comprehensive Financial Security

A comprehensive motor insurance policy provides extensive coverage for damages or injuries caused by theft, accidents, vandalism, or natural disasters. It also provides financial support, pays repair or replacement costs of car damage, and offers complete peace of mind.

3.     Own Damage Cover in Accidents

Car insurance plans offer financial assistance in the event of personal accidents. You can claim medical expenses for injuries or receive compensation in the event of accidental death.

4.     Easy Claim Settlement

Many motor insurance plans in India offer hassle-free claim settlement and cashless repairs at network garages. This means you do not have to bear the upfront costs of repairs, ensuring minimal disruption to your life.

5.     Additional Benefits

Car insurance policies often come with add-on benefits, like zero depreciation cover, roadside assistance, tyre safeguards, and engine protection. With zero depreciation, you can claim the full amount for repairs or part replacements without any deductions.

Key Provisions of the Motor Vehicles Act to Follow While Driving 

The Motor Vehicles Act, 1988, governs several aspects of transportation and emphasises that vehicle owners must carry documents while driving.

• Vehicle registration
• Licensing of drivers and conductors
• Issuance of permission for the vehicle operation
• Offences, liabilities and penalties
• Traffic rules and regulations
• Insurance requirements

Every bike or car owner must carry motor insurance details while driving; otherwise, they can face hefty fines.

Final Insights

Avoid last-minute arrangements and rush fees, choose a motor insurance policy and ensure a smooth transition to car ownership. Ultimately, mandatory motor insurance can save you from penalties on Indian roads. Opt for third-party coverage and comprehensive car insurance to stay safe and in compliance.