Third-Party Insurance: SC Extends Mandatory Cover for New Vehicles, What It Means For You
Third-Party Insurance: Supreme Court extends mandatory third-party insurance cover — four years for new cars, six years for new two-wheelers — citing 56% of vehicles running uninsured.
Third-party insurance is mandatory for every vehicle on Indian roads, offering financial protection against damage or injury caused to others.
New Delhi—Third-Party Insurance: The Supreme Court on Tuesday directed that the mandatory third-party insurance period for new vehicles be extended by one year, ordering that new cars must henceforth be covered for four years and new two-wheelers for six years at the time of purchase, in a move aimed at improving compliance with the Motor Vehicles Act (MVA) and enhancing road safety across the country.
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Third-Party Insurance: The Court’s Direction
A bench of Justices Sanjay Karol and Prashant Kumar Mishra issued the direction while disposing of an appeal filed by National Insurance Company Ltd. The bench noted that despite an earlier 2018 mandate requiring three-year third-party cover for new cars and five-year cover for new two-wheelers, a large number of vehicles continue to ply on Indian roads without valid insurance.
“We notice that despite eight years having passed from the said direction, a large number of vehicles remain uninsured. While the IRDA and General Insurance Council have recommended that this period not be enhanced, we are of the view that it is in the interest of road safety that the period be enhanced by one year,” the bench stated, according to the judgment.
Third-Party Insurance: Scale of the Uninsured Vehicles Problem
The court recorded that nearly 56 per cent of vehicles plying on Indian roads remain uninsured, citing the Report of the Standing Committee on Finance 2024–25. In absolute terms, the judgment noted, the number of uninsured vehicles stands at 16.54 crore out of 30.48 crore vehicles, a gap the court said routinely delays or defeats the statutory safeguard of compensating accident victims.
The bench was dealing with larger issues concerning non-compliance with Section 146 of the Motor Vehicles Act, which mandates third-party insurance for all vehicles, and the need for a uniform motor vehicle insurance policy structure covering vehicle occupants in addition to third-party risks.
Third-Party Insurance: Four-Layer Insurance Structure Approved
In its order, the court approved a four-layer insurance structure for private vehicles: a mandatory third-party policy, an optional legal liability cover for occupants or pillion riders, an optional personal accident cover for the owner-driver and passengers, and an optional own-damage cover.
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Enforcement Measures: ANPR Cameras, E-Challans, and Fuel Pump Pilot
To curb the circulation of uninsured vehicles, the court directed that Automatic Number Plate Recognition (ANPR) cameras be integrated with the Insurance Information Bureau and the VAHAN database to automatically detect uninsured vehicles and issue e-challans. The court also directed the Centre to evolve a pilot project to test refusing fuel at petrol pumps to vehicles without valid insurance, and separately directed pilot projects at toll plazas to replace manual stopping with automatic detection of vehicles, citing the effect of long queues and accident risk at these points.
Third-Party Insurance: Compliance Timeline
The court directed IRDAI to immediately issue necessary directions to implement the ruling, and ordered all stakeholders to comply and file affidavits by August 14. The matter has been listed for further consideration on August 18.
During the proceedings, the IRDAI and the General Insurance Council had suggested that extending the tenure of mandatory insurance would not serve the larger public interest, contending that longer-tenure policies would increase premiums and had not significantly reduced the number of uninsured vehicles. Disagreeing with that recommendation, the Supreme Court held that extending the insurance period was warranted in the larger interest of road safety.
The bench also directed IRDAI to formulate uniform policy wordings for the optional covers under the four-layer structure, and to make it mandatory for insurers to provide a consumer-friendly information sheet clearly distinguishing between the mandatory third-party component and the optional layers of coverage.
