A lot of vehicle owners believe they drive responsibly and follow every rule, but accidents can happen out of the blue, and it’s not always your fault. Just one unexpected accident could lead to legal issues and compensation claims running into lakhs, even if you weren’t at fault. The reason? You might not have third-party motor insurance, a cover which typically costs less than Rs 3,500 a year a year for vehicles with engines up to 1500 cc.
Every year from 11–17 January, we observe Road Safety Week, which serves as a reminder that road safety isn’t just about how we drive; it’s also about being prepared for unexpected situations. Third Party Motor Insurance is mandatory under the provisions of the Motor Vehicles Act, 1988, and plays a vital role in providing financial protection to accident victims.
Keep reading to find out why third-party insurance is compulsory, the penalties for not having it, the costs for two-wheelers and four-wheelers, available discounts, and more.
Why is third-party insurance mandatory?
Despite being a legal requirement, awareness and compliance remain low. According to the IRDAI letter dated January 9, 2026, over 50% of vehicle owners in India lack third-party motor insurance, largely due to a lack of awareness.
With India witnessing a high number of road accidents every year, third-party insurance acts as a basic safety net, ensuring innocent victims are compensated and legal liabilities are met. By making this insurance compulsory, the government aims to protect accident victims financially, promote responsible driving, and ensure accountability among vehicle owners.
“Since accidents can involve innocent road users, the law prioritises public welfare, making third-party insurance compulsory for all vehicles operating on public roads, “ says Paras Pasricha, Head of motor insurance, Policybazaar.
What’s covered in third-party motor insurance and what’s not?
Third-party motor insurance is designed to protect others from the financial consequences of your actions on the road. In simple terms, it covers injuries or death of another person caused by your vehicle, as well as damage to someone else’s property, such as another car, motorcycle, or roadside structure.
It is important to note that TPI does not cover damage to your vehicle or your medical expenses.
“Third-party insurance covers the financial and legal responsibility arising from injury, death or property damage caused to a third party due to the insured vehicle. It covers legal liabilities and court-awarded compensation. However, what it does not cover is your own car or bike; any damage to your vehicle, theft or personal repair costs are completely excluded. Many policyholders only realise these exclusions when they file a claim, “ says Krunal Vora – Senior Vice President & Product Head – Motor Insurance, Probus.
