Introduction
In today’s rapidly changing world, the need for a car has become a necessity, not a luxury. Whether it is a bike for commuting or a car for traveling with family, vehicles are an essential part of our lives. However, along with the benefits, there are some drawbacks too, such as accidents, theft, natural calamities, and unexpected damages, which may lead to financial losses. This is where motor insurance steps in.
Motor insurance not only safeguards your vehicle from financial losses but is also a mandatory requirement under Indian law. A good motor insurance policy provides you with peace of mind, legal compliance, and financial protection. In this blog, we will discuss everything you need to know about motor insurance in a simple and detailed way.
What is Motor Insurance?
Motor insurance is an agreement between the car owner and the insurance company. As per this agreement, the insurance company offers financial security against loss or damage to the insured vehicle due to accidents, theft, fire, natural disasters, or third-party liabilities.
Conversely, the insurance company receives a predetermined payment called premium. Based on the insurance plan, motor insurance protects against:
• Damage to your own car
• Injury or death of a third party
• Damage to third-party property
In India, operating a vehicle without motor insurance is an offense under the Motor Vehicles Act.
Why is Motor Insurance Important?
Motor insurance is important for many reasons:
1. Legal Requirement
As per Indian law, third-party motor insurance is compulsory. Without it, you may face heavy fines or legal trouble.
2. Financial Protection
Accidents can result in costly repairs or medical expenses. Motor insurance saves you from sudden financial burden.
3. Protection Against Third-Party Liability
If your vehicle causes injury, death, or property damage to a third party, insurance covers the compensation.
4. Coverage Against Theft & Natural Disasters
Comprehensive policies cover vehicle theft and damages due to floods, earthquakes, cyclones, fire, etc.
5. Peace of Mind
Knowing that your vehicle is insured allows you to drive stress-free.
Types of Motor Insurance in India
Motor insurance policies are mainly divided into three types:
1. Third-Party Motor Insurance
This is the most basic and mandatory insurance.
Covers:
- Injury or death of a third party
- Damage to third-party property
Does NOT cover:
- Damage to your own vehicle
- Theft of your vehicle
It is affordable but offers limited protection.
2. Comprehensive Motor Insurance
This is the most popular and recommended policy.
Covers:
- Third-party liabilities
- Damage to your own vehicle
- Theft
- Fire, explosion
- Natural calamities
- Man-made disasters (riots, vandalism)
Though slightly expensive, it provides complete protection.
3. Standalone Own Damage Cover
This policy covers only damage to your own vehicle. It is purchased along with a third-party policy.
Suitable for:
People who want flexibility and better pricing options.
Add-On Covers in Motor Insurance
Add-ons enhance your basic coverage. Some popular add-ons include:
- Zero Depreciation Cover – Full claim without depreciation deduction
- Engine Protection Cover – Protects engine from water damage
- Roadside Assistance – Help during breakdowns
- Return to Invoice – Get invoice value in case of total loss
- NCB Protection – Protects No Claim Bonus
Add-ons increase premium but offer extra safety.
What is Covered Under Motor Insurance?
A comprehensive motor insurance policy usually covers:
- Accidental damage to vehicle
- Theft or burglary
- Fire and explosion
- Natural calamities (flood, earthquake, storm)
- Man-made disasters (riots, strikes)
- Third-party injury or death
- Third-party property damage
What is Not Covered (Exclusions)?
Motor insurance does not cover:
- Driving without a valid driving licence
- Drunk driving or drug influence
- Normal wear and tear
- Mechanical or electrical failure
- Consequential damages
- Damage outside geographical limits
- Policy expiry at the time of accident
Knowing exclusions helps avoid claim rejection.
How Does Motor Insurance Premium Get Calculated?
Motor insurance premium depends on several factors:
- Type of vehicle (car/bike)
- Vehicle age
- Engine capacity (CC)
- Insured Declared Value (IDV)
- Type of policy
- Add-on covers
- Claim history (No Claim Bonus)
- Location of vehicle registration
Lower risk and good driving history reduce premium.
What is No Claim Bonus (NCB)?
NCB is a reward given by insurance companies for claim-free years.
- It can range from 20% to 50% discount on premium
- Applicable on own-damage premium
- Transferable when you change insurer
Maintaining NCB can save a lot of money.
Motor Insurance Claim Process (Step-by-Step)
Filing a motor insurance claim is simple if done correctly:
Step 1: Inform the Insurance Company
Notify your insurer immediately after the accident or theft.
Step 2: File FIR (If Required)
Mandatory in case of theft, third-party injury, or major accident.
Step 3: Claim Registration
Register claim online or offline with policy details.
Step 4: Vehicle Inspection
Surveyor inspects vehicle damage.
Step 5: Repair & Settlement
- Cashless repair at network garage
- Reimbursement if repaired outside network
After approval, claim amount is settled.
Cashless vs Reimbursement Claims
Cashless Claim
- Repairs done at network garage
- Insurer pays garage directly
- Minimal paperwork
Reimbursement Claim
- You pay repair cost first
- Submit bills and documents
- Insurer reimburses later
Cashless claims are faster and easier.
How to Choose the Best Motor Insurance Policy?
Here are some tips to choose the right policy:
- Compare multiple insurance plans
- Check coverage and exclusions
- Look for good claim settlement ratio
- Choose required add-ons only
- Ensure wide network garages
- Read customer reviews
- Avoid under-insuring IDV
Never select policy based only on low premium.
Online vs Offline Motor Insurance
Online Motor Insurance
- Easy comparison
- Lower premium
- Quick policy issuance
- Paperless process
Offline Motor Insurance
- Personal assistance
- Suitable for first-time buyers
- Slightly higher premium
Online mode is more popular today.
Motor Insurance Renewal Tips
- Renew before expiry date
- Review coverage annually
- Add or remove add-ons as needed
- Maintain NCB
- Update personal details
Late renewal may lead to inspection and higher premium.
Common Motor Insurance Myths
- “Old cars don’t need insurance” – False
- “Red car has higher premium” – Myth
- “Claim once means policy useless” – Wrong
- “Third-party insurance is enough” – Risky
Conclusion
Motor insurance is not only mandatory but also a financially prudent choice. It safeguards you against unforeseen losses, legal obligations, and psychological distress. Given the various choices available in the market, it is essential to make the right choice of motor insurance in a proper and comparative manner.
It is essential to read the terms and conditions of the motor insurance policy, make your choices according to your needs, and renew your policy on time. A properly selected motor insurance policy will provide you with safety, security, and peace of mind while traveling.
Government Circulars & Regulations on Motor Insurance in India
1️⃣ IRDAI Master Circular — Motor Insurance Claims & Rules
The Insurance Regulatory and Development Authority of India (IRDAI) has issued a master circular for the motor insurance industry, consolidating several old directives/circulars and introducing new rules. Key points include:
✔️ Insurance companies can no longer reject claims due to a lack of documents.
✔️ Insurance companies are only allowed to request essential documents, and non-essential documents cannot be requested to reject a claim.
✔️ Approximately 13 previous circulars have been superseded by this circular.
This means: The risk of a customer’s claim being rejected without reason has been reduced — this is a consumer-friendly step taken by the government/IRDAI.
2️⃣ IRDAI Circular – IMT-29 Coverage Mandatory
IRDAI has issued another important circular stating that:
✔️ IMT-29 cover is now mandatory to be included automatically (inbuilt) in motor insurance policies, especially in policies where private vehicles are used by employees.
✔️ The objective is to ensure that employees also automatically receive the benefit of the claim in case of an accident, without the hurdle of obtaining separate coverage.
✔️ No additional premium will be charged for this IMT-29 coverage until further notice from IRDAI.
IMT-29 in simple terms: This is a special third-party cover clause that protects employees under the insurance provided by the vehicle owner.
3️⃣ Master Circular – Rural & Third Party Obligations (2025)
IRDAI issued a master circular on July 28, 2025, incorporating motor third-party obligations and coverage requirements in rural areas under new regulations.
✔️ This circular expands the scope of “Motor Third Party Obligations”.
✔️ Compliance with this directive has been made mandatory for all insurance companies for FY 2025-26 and FY 2026-27.
4️⃣ Proposed Government & MoRTH Policy Changes (Motor Vehicles Act)
Although this is not a circular, the central government is preparing for major changes to the Motor Vehicles Act, 1988, which may include:
✔️ Stricter penalties and restrictions for driving uninsured vehicles on the road.
✔️ Stricter insurance-related regulations — such as prohibiting petrol/diesel filling without motor insurance.
✔️ Severe legal consequences for driving uninsured vehicles.
The goal of these proposals is to enhance road safety and ensure 100% insurance coverage, thereby providing better support to accident victims.
Impact of Government Circulars on Motor Insurance
✔️ Customers are receiving greater protection and rights — claim rejection is no longer easy.
✔️ Improved policy coverage — for example, the mandatory IMT-29 provides security to employees.
✔️ Legal compliance is becoming stricter — penalties for driving uninsured vehicles, and possibilities like not getting a FASTag or fuel without insurance are being discussed.
✔️ Insurance companies are instructed to provide transparent, customer-centric services to their customers.
