SC extends mandatory insurance for new cars, bikes: Third-party vs comprehensive motor cover, can you upgrade?

The Supreme Court on Tuesday extended the mandatory third-party motor insurance coverage of new vehicles by one year. This means new cars will now be required to have four years of coverage, while two-wheelers will need six years of coverage at the time of purchase or registration.

The ruling noted that, despite the statutory mandate, a “shocking” number of vehicles continued to ply Indian roads without valid third-party insurance, according to media reports.

This, the SC said, often forces accident victims and their families to “run from pillar to post” in order to secure compensation.

Until now, buyers of new vehicles were required to obtain three-year third-party insurance for cars and five-year cover for two-wheelers. The SC also proposed a system in which vehicles without insurance can be denied fuel at petrol pumps.

Can you buy insurance only from vehicle dealer?

No, it is not mandatory to buy motor insurance from the vehicle dealer.

Paras Pasricha, Business Head of Motor Insurance at Policybazaar, says customers are free to compare insurance policies from different insurers or purchase a plan through any online insurance platform before taking delivery of their new vehicle.

However, it is mandatory under Indian law to have a valid third-party motor insurance policy before the vehicle owner drives the vehicle on public roads. This legal requirement protects the insured against financial liability arising from injury, death or property damage to any third party.

Third-party vs comprehensive motor insurance: What’s the difference?

According to Pasricha, customers need to know that third-party insurance does not cover damage to their own vehicle.

“If customers want protection against accidents, theft, fire, floods or any natural and man-made calamities that may damage their car or two-wheeler, then they must consider buying a comprehensive motor insurance policy,” Pasricha said.

A comprehensive motor insurance policy includes mandatory third-party liability cover along with own damage cover, which in turn provides broader financial protection against both third-party liabilities and damage to the insured vehicle, subject to the policy terms, conditions and exclusions.

Can you convert a third-party cover to a comprehensive one?

Yes, customers do not have to wait until their insurance renewal date to convert their third-party cover to a comprehensive policy. If a person already has a long-term third-party policy, they can purchase a co-terminus Standalone Own Damage (SAOD) policy during the policy term, the expert suggested.

The SAOD policy, according to Pasricha, is issued for the remaining tenure of the long-term third-party policy so that both policies expire on the same date.

“Together, these provide protection equivalent to a comprehensive motor insurance policy," he said, adding that some insurance companies may require additional underwriting checks or inspection before issuing the policy.

The additional premium depends on factors such as the vehicle's make and model, age, Insured Declared Value (IDV), location, insurer underwriting norms and the add-on covers based on the customer's requirements, he said.

SC issues directions to speed up pending accident compensation cases

The Supreme Court also took note of the growing backlog of motor accident compensation cases pending before Motor Accident Claims Tribunals (MACTs) and issued directions to expedite the disposal of older cases.

For claims arising from accidents that occurred before 31 March 2022, it directed the State police authorities to promptly file Detailed Accident Reports before the respective tribunals, along with supporting records such as the FIR, medical and post-mortem reports, insurance documents and vehicle permits, according to a report by The Hindu.

The Bench further directed state police to provide timely service of notices and ensure the production of relevant witnesses before MACTs to expedite the disposal of these pending claims.

SC listed the matter for further hearing on 18 August to review compliance with its directions.