Key Takeaways
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Yes. Section 146 of the Motor Vehicles Act, 1988 makes third-party cover compulsory. It applies to any car used in a public place. The cover pays people your car injures or kills, with no upper limit. Damage to other people’s property is capped at ₹7.5 lakh. It pays nothing towards your own car, your own injuries or theft.
Is third-party insurance mandatory in India
Meera Raghavan renews her small hatchback every March and has never claimed. She assumed the cheapest legal option left her with nothing. What it leaves her with is the one cover that has no upper limit at all.
Section 146(1) is the source of the duty. It says no person shall use a car in a public place without a valid policy. The duty attaches to using the car, so parking it off-road and letting the cover lapse is lawful.
Section 147 then sets what that policy must contain. It must cover death or bodily injury to any person caused by the car. It must also cover damage to a third party’s property. Insurers sometimes call this an act-only policy, because it covers the minimum the Act demands.
Who is exempt
The exemptions are narrow and almost nobody owning a private car falls inside them. Section 146(2) exempts cars owned by the Central or a State Government. They must be used for government purposes with no commercial element.
Section 146(3) allows certain public authorities to be exempted. Those bodies must maintain a fund to meet their liability instead. State transport undertakings and local authorities can qualify.
A paid driver gets one narrow protection. An employee driving an uninsured car does not break the section unknowingly. He must know, or have reason to believe, that no policy is in force. The owner remains liable regardless.
What third-party insurance covers
The injury side has no ceiling, which is what makes this cover worth having. If your car kills a pedestrian, the award against you can run into tens of lakhs. The policy meets it in full.
Property damage works differently. A third-party policy on a private car pays up to ₹7.5 lakh for damage to someone else’s property. The usual case is another car, though a wall, a shopfront or a parked scooter all count.
A Motor Accident Claims Tribunal decides what the compensation should be. It weighs the injury, the loss of earning capacity, the dependants and the evidence. Your insurer then satisfies the award.
Two routes pay a fixed sum without anyone proving who was at fault. They matter because most people never hear of them. Both sit in the Act itself.
Route | Situation | Amount |
|---|---|---|
Section 164 | Death in a motor accident | ₹5,00,000 |
Section 164 | Grievous hurt in a motor accident | ₹2,50,000 |
Section 161 | Death in a hit-and-run | ₹2,00,000 |
Section 161 | Grievous hurt in a hit-and-run | ₹50,000 |
Section 164 removes the need to prove negligence. A claimant can take the fixed sum instead of fighting a longer case. Section 161 covers the situation where the car that caused the accident is never traced.
What third-party insurance does not cover
Own damage is the part of a policy that pays to repair your own car. A third-party policy contains none of it. Your bumper, your windscreen and your engine are all outside the cover.
Theft of your car sits outside it too, as do fire and flood damage to your own vehicle. So does your own injury, which a separate compulsory cover handles. That owner-driver cover provides ₹15 lakh and costs ₹750 a year before 18% GST.
One widely published claim about exclusions needs correcting, because it misleads readers about their real exposure. Many pages say that drink-driving or driving without a licence means the accident is simply not covered. The victim is still paid.
Where a policy condition is broken, the insurer must still satisfy the third party’s award. The insurer may then recover that money from the owner. Breaking a condition does not make the liability vanish. It moves the debt from the insurer to you.
That distinction changes the stakes. An uninsured-in-effect driver does not walk away from a ₹40 lakh award. He owes it to the insurer that paid it.
How long your third-party cover must run
This changed in August 2026 and most published guidance has not caught up. The Supreme Court decided National Insurance Co Ltd v. Smt Thungala Dhana Laxmi on 4 August 2026. It is reported at 2026 LiveLaw (SC) 759. Justices Sanjay Karol and Augustine George Masih heard it.
The Court raised the third-party cover a buyer must arrange at purchase. A new car now needs four years of cover, up from three. A new two-wheeler needs six years, up from five.
Those earlier periods came from the 2018 direction in S. Rajaseekaran v. Union of India. The 2026 order modifies them. IRDAI and the General Insurance Council both opposed the extension, and the Court went ahead regardless.
The same order pushed hard on enforcement, which matters more than the extra year. Number plate recognition cameras are to be linked to insurance and registration records. Those are the Insurance Information Bureau files and the VAHAN portal. That combination generates an e-challan against an uninsured car without any officer being present.
State police are also to receive devices and apps tied to those databases. An officer will be able to check your cover against the registration in real time. A separate pilot linking fuel supply to valid insurance was suggested for IRDAI and the ministry to examine.
The Court directed IRDAI to issue the implementing directions immediately. The detail runs through the regulator. Confirm the required term with your dealer or insurer when you buy. The direction is clear even where the paperwork is still catching up.
What third-party insurance costs
The base premium is set by the government and is identical at every insurer. The Ministry of Road Transport and Highways notifies the rates in consultation with IRDAI. Shopping around on a third-party policy therefore changes the service you get, never the base price.
Engine capacity | Annual base premium |
|---|---|
Up to 1000cc | ₹2,094 |
Above 1000cc and up to 1500cc | ₹3,416 |
Above 1500cc | ₹7,897 |
These rates took effect on 1 June 2022 and have stood since. A revision of 10 to 25% for 2026-27 was reported in April 2026. It had not been gazetted at that point. The common claim that the government raises these rates every year does not match the record.
GST of 18% applies on top of the base premium. On a small hatchback that takes ₹2,094 to roughly ₹2,471. The figure on your policy may differ slightly, because your cover may include the owner-driver element as well.
The penalty for driving without third-party insurance
Section 196 changed on 15 August 2026 under the Jan Vishwas amendments. The old flat amounts of ₹2,000 and ₹4,000 no longer describe the position. Nearly every article still published online quotes them.
The penalty is now tied to the premium you avoided. A first offence costs three times the applicable third-party base premium, or ₹5,000, whichever is higher. A repeat offence costs five times that premium, or ₹10,000, whichever is higher.
That formula produces a result most readers will not expect. For every private car slab, the multiplier beats the floor. The ₹5,000 figure almost never applies to a car.
Engine capacity | Base premium | First offence | Repeat offence |
|---|---|---|---|
Up to 1000cc | ₹2,094 | ₹6,282 | ₹10,470 |
Above 1000cc to 1500cc | ₹3,416 | ₹10,248 | ₹17,080 |
Above 1500cc | ₹7,897 | ₹23,691 | ₹39,485 |
Those figures are worked from the rates in force and move whenever the notified rate moves. Section 196 also allows imprisonment of up to three months. The amount payable in your state may vary because of local notifications and compounding rules.
The fine is the smaller risk. Driving uninsured leaves you personally liable for the whole award. The injury side of that liability has no ceiling. Meera pays ₹2,094 a year to transfer a risk that could otherwise take her house.
Conclusion
Third-party cover is compulsory under Section 146 for any car used in a public place. The exemptions reach only government and certain public bodies. It pays without limit for injury or death to others and up to ₹7.5 lakh for their property. It pays nothing towards your own car, your own injuries or theft.
A new car must now carry four years of cover bought at purchase. That follows the Supreme Court order of 4 August 2026. Enforcement is moving towards automatic detection through camera and database linkage. Letting cover lapse is becoming far harder to get away with.
Meera’s renewal has not moved in price since June 2022 and starts at ₹2,094 a year before tax. The cost of skipping it starts at three times that figure in penalty alone. Everything beyond the penalty, including an unlimited injury award, lands on you.
Frequently asked questions
Is third-party insurance mandatory for all cars in India?
Yes, for any car used in a public place, under Section 146 of the Motor Vehicles Act, 1988. Only government vehicles used for government purposes and certain exempted public authorities fall outside it.
What is the fine for driving without third-party insurance?
Since 15 August 2026 it is three times the applicable third-party base premium, or ₹5,000, whichever is higher. A repeat offence is five times that premium, or ₹10,000, whichever is higher.
How long must a new car’s third-party cover run?
Four years, bought at the time of purchase, following the Supreme Court order of 4 August 2026. New two-wheelers must carry six years.
Does third-party insurance cover damage to my own car?
No. It covers only injury, death and property damage caused to other people. Repairs to your own car need own damage cover.
How much does third-party car insurance cost?
The base premium is ₹2,094 up to 1000cc and ₹3,416 up to 1500cc. Above 1500cc it is ₹7,897, plus 18% GST in each case. The rate is set by the government and is the same at every insurer.
Is third-party insurance still mandatory on an old car?
Yes. The duty attaches to using the car in a public place and does not depend on its age.
Who decides how much a third-party claim pays?
A Motor Accident Claims Tribunal assesses the compensation based on the injury, lost earnings, dependants and evidence. The insurer then satisfies the award.
Is third-party cover enough on its own?
It meets the legal requirement and covers an unlimited liability for injuring others. It leaves your own car, your own injuries and theft entirely uncovered.
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