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Driving carefully is every vehicle owner’s responsibility, but accidents can occur unexpectedly. Despite this reality, nearly half of vehicle owners in India do not have third-party motor insurance, mainly due to lack of awareness. Many people assume insurance is only needed for their own vehicle, which is a dangerous misconception.

Third-party insurance is not just a legal requirement—it is a crucial financial and legal safety net that protects both you and others on the road.

What is third-party vehicle insurance?

Third-party insurance is a basic motor insurance policy that covers damage, injury, or death caused to another person or their property due to your vehicle. It is mandatory under Indian law and is regulated by IRDAI.

Even a small accident can lead to compensation claims worth lakhs of rupees, along with legal proceedings. Third-party insurance protects you from this financial burden.

Why is third-party insurance so important?

According to IRDAI data (January 2026), over 50% of vehicles in India are running without valid third-party insurance. This is alarming, especially since India records one of the highest numbers of road accidents globally.

The main objectives of third-party insurance are:

• To ensure accident victims receive compensation

• To protect vehicle owners from heavy legal and financial liabilities

• To promote responsible and accountable driving

Without this insurance, even if you are not entirely at fault, legal costs and compensation can become overwhelming.

What does third-party insurance cover?

Third-party insurance covers:

• Injury or death of another person

• Damage to another person’s vehicle or property (car, bike, roadside assets, etc.)

• Legal expenses arising from third-party claims

What it does NOT cover:

• Damage to your own vehicle

• Medical expenses for yourself

• Theft, fire, or natural disasters

Many people realise these limitations only when they attempt to file a claim, which is why understanding coverage beforehand is essential.

Legal consequences of not having third-party insurance

Driving without valid third-party insurance can lead to serious penalties:

• Fine starting from ₹2,000, increasing for repeat offences

• Possible imprisonment

• Suspension or cancellation of driving licence

• Court-ordered compensation running into lakhs of rupees in case of serious accidents

These penalties are far more costly than the insurance itself.

How much does third-party insurance cost?

Third-party insurance is one of the most affordable forms of insurance:

• Annual premium for cars up to 1500cc is generally under ₹3,500

• Premium rates are fixed by the government under the Motor Vehicles Act

• Long-term policies (3 or 5 years) are cheaper overall and eliminate yearly renewal hassles

Third-party vs comprehensive insurance

• Third-party insurance: Mandatory, covers damage to others only

• Comprehensive insurance: Optional, covers third-party damage plus your own vehicle, theft, fire, and personal accident

Third-party insurance is the minimum legal requirement; comprehensive insurance offers broader protection.