IRDAI rules for car insurance plans

The insurance industry in India is regulated by The Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI has a set of rules and regulations that govern how car insurance policies should be issued and how they should be administered. This article will discuss the IRDAI rules for auto insurance policies so that you can make an informed decision when buying an auto insurance policy. We will cover the following topics:

What is meant by IRDAI car insurance rules?

IRDAI car insurance rules are regulatory guidelines issued by the Insurance Regulatory and Development Authority of India to ensure motor insurance remains fair, transparent and customer-focused. These rules standardise how insurers design, price and service policies under IRDAI rules for car insurance plans, including the structure of third-party liability cover, optional comprehensive cover and the timelines for surveys and claim settlements.

Recent updates reinforce digital processes, encourage wider cashless repair accessibility and ensure clearer communication at every stage of the policy. The guidelines also define how depreciation should be applied for IDV calculations, how total loss must be assessed, and the responsibilities insurers hold during servicing. Understanding IRDAI rules for car insurance enables customers to make informed choices and ensures smoother handling of their policy throughout its term.

Third-party insurance coverage guidelines

Here are the IRDAI car insurance rules for third-party liability policies:

1. The insurer must reimburse the concerned third party for any loss of property or life caused by the insured vehicle.

2. In the case of the third party's demise, the insurer must compute the compensation amount based on the dead individual's net worth. The Indian Motor Accidents Claims Tribunal passes the ultimate judgement in case of any issue.

3. In the event of third-party property loss, the compensation amount will be determined by the degree of the damage done by the insured vehicle. This can amount to up to a limit of INR 7.5 lakhs.

4. The insurer needs to pay any legal responsibilities resulting from an accident involving the concerned third party.

Comprehensive insurance coverage guidelines

Here are the IRDAI car insurance rules for comprehensive policies:

1. All coverage provided under a third-party legal liability insurance policy must be provided by the insurance carrier.

2. If the car insurance claim is authorised, the insurer is required to offer theft coverage to the insured.

3. In the event of an authorised accident claim, the insurer is obligated to reimburse the cost of restoring the damaged car.

4. According to the conditions of the insurance policy, coverage for natural as well as man-made disasters, damage from explosion or fire and so on should be provided under the comprehensive auto insurance policy.

Customer turnover terms

Here is a list of defined timelines within which the insurer and insured needs to adhere for transactions and other procedures:

Depreciation rules

Here is table of IRDAI-approved depreciation table:

IRDAI rules for car insurance renewal

IRDAI requires policyholders to renew their motor insurance before expiry to avoid a break in coverage. As per current IRDAI rules, insurers must send timely renewal reminders through multiple channels, helping customers act before the due date. No Claim Bonus remains protected if renewal is completed within 90 days of expiry.

A vehicle inspection is generally required only when a policy has lapsed for more than 90 days. Throughout renewal, customers are free to switch insurers, revise their cover, update add-ons or adjust the IDV. A valid third-party policy must remain active at all times as mandated by law. IRDAI ensures premium calculation transparency and standardised turnaround times so that renewals remain simple and predictable.

IRDAI rules for total loss

IRDAI classifies a vehicle as a total loss or constructive total loss when the repair cost exceeds 75 per cent of its Insured Declared Value. In such cases, the insurer settles the claim based on the IDV after accounting for salvage as per regulatory norms. For theft or total loss, the registration certificate must be submitted for cancellation through the insurer, following the prescribed procedure.

Survey timelines are clearly defined, and claim settlement must be completed within the mandated period once documentation is verified. An FIR, claim form and other relevant documents are required, with keys submitted for theft claims only when applicable. These rules ensure fairness, consistency and quicker claim handling.

IRDAI new rules for car insurance

Here are the recent IRDAI regulation changes:

1. New cars need to have mandatory auto insurance policies of 3-year third-party liability coverage and annual standalone own damage cover.

2. No claim bonus (NCB) grid is made the same for all insurers.

3. In case of theft or total loss cases, the RC of the car needs to be sent to the insurers by the insured, which will stand cancelled.

4. “Compulsory deductibles” are changed to “Standard deductibles”, which are fixed at INR 1000 for vehicles with engine capacity of 1500cc or less. In the case of higher engine capacity vehicles, it is set to INR 2000.

5. All passengers travelling in an insured vehicle are recommended to have coverage of at least INR 25,000.

IRDAI timelines for transactions and procedures

The latest IRDAI framework emphasises faster, more digital-first motor insurance servicing. Surveyors for own-damage claims must be appointed within 24 hours of intimation, and survey reports are typically required within 10 days. Insurers must request any additional documents within a reasonable timeframe and settle or reject a claim within 30 days of receiving all necessary information.

Policies issued digitally must be available immediately, with hard or soft copies shared promptly as required. Grievances raised through IGMS must be addressed within the stipulated timelines. These enhanced service standards ensure customers experience quicker processing and more transparent communication.

General exclusions of a car insurance policy

Motor insurance policies do not cover damage resulting from normal wear and tear, mechanical or electrical breakdowns, or depreciation. Losses caused when the vehicle is used outside the permitted usage, such as racing or commercial deployment without appropriate cover, are excluded. Claims arising from driving under the influence of alcohol or drugs, driving without a valid licence or intentional damage are not payable.

Risks related to war, nuclear events or foreign hostilities are excluded, and consequential losses are typically not covered unless an add-on specifies otherwise. Understanding these exclusions helps policyholders avoid claim rejections and manage expectations clearly.

Conclusion

Owning a car is a great privilege, but it also comes with certain responsibilities. One of the most important responsibilities is to ensure that your car is properly insured. In India, the Insurance Regulatory and Development Authority of India (IRDAI) has issued the above-mentioned guidelines for auto insurance policies in order to protect the interests of policyholders. These rules apply to all car insurance policies and must be adhered to in order to ensure that your policy remains valid.

FAQs

1)   What are the new rules of IRDAI insurance?

Updated IRDAI rules include mandatory long-term third-party cover for new vehicles, a uniform No Claim Bonus structure, revised deductibles, strengthened claim timelines and enhanced digital processes. RC submission is required for total loss cases, and grievance handling has been made more responsive to support customers more effectively.

2)   What is the IRDAI rule for IDV?

Under IRDAI rules for car insurance plans, the IDV must reflect the current market value of the vehicle based on standard depreciation tables. IDV forms the basis for settlement in total loss or theft cases. Insurers must offer transparent IDV options within the permissible range and cannot significantly overstate or understate this value.

3)   What is the 3-year rule of IRDAI?

For new private cars, IRDAI requires a compulsory three-year third-party insurance policy at the time of purchase. This ensures uninterrupted legal protection and reduces the number of uninsured vehicles on the road. The own-damage cover, however, continues to be purchased and renewed annually unless chosen as a bundled long-term option.

4)   What are the new rules of IRDAI related to motor insurance?

Recent updates focus on ensuring uniformity in No Claim Bonus, improving survey and claim handling timelines, requiring RC cancellation for total loss cases and reinforcing the availability of long-term third-party cover for new vehicles. These changes streamline processes and strengthen policyholder protection.

5)   What is Regulation 22 of IRDAI?

Regulation 22 relates to insurer obligations around communication and claims servicing under the Protection of Policyholders’ Interests Regulations. It ensures transparency, fair treatment and timely claim settlement, forming a core part of motor insurance service standards.