What does Indian law say about motor insurance?
As per the Motor Vehicle Act, 1998, one cannot drive without at least a third-party insurance cover. When purchasing a new car, the dealer provides an insurance policy with up to 3 years of validity (third-party liability only). Afterwards, you have to renew the insurance yourself every year.
The dealer offers an option between third-party and comprehensive insurance to suit different buyer needs. Here’s how each type of policy benefits the car owner:
| Attribute | Third-Party Insurance | Comprehensive Insurance |
| Coverage | Covers damage expenses caused to the third party | Coverage for third-party and self-vehicle damage |
| Add-on Facilities | Not available | Zero depreciation cover, roadside assistance cover, and more, depending on the policy |
| Legal Requirement | Mandatory | Optional |
| Cost | Premium depends on the engine capacity and IRDAI guidelines | Premium depends on IDV, vehicle model, and other factors |
| Policy Exclusions | Doesn’t cover damage caused to your car | Covers self-car damage, unless the accident is caused due to alcohol, negligent driving, or without a valid licence |
Consequences of driving without insurance
Regardless of how cautiously you are driving, accidents can unexpectedly happen and result in damage. Car insurance is more than a legal formality; it’s a safety net in such cases. It protects you and the third party from hefty repair and service costs. Also, driving with an expired licence can lead to legal trouble.
Here are all kinds of consequences you may have to deal with:
Legal penalties
The regulations have been revised, w.e.f. March 2025. Under these norms:
- You have to pay a fine of ₹2,000 along with/or up to three months of prison or community service.
- If the traffic police catch you again, your fine can go up to ₹4,000. You may also have to face an imprisonment of three months or longer, depending on the state officer’s discretion.
- Certain cases (or if you are caught for the third time) can result in the impoundment of your vehicle. You may not be able to renew the vehicle’s registration easily or obtain the required permits.
Traffic police action
Whenever a traffic police officer stops a car, they ask for papers, and if you don’t have a valid insurance, you are in trouble. The officer will instantly generate a challan for you with a possible court date.
In case they check your records and there’s a history of insurance-related fines, your vehicle may be impounded on the spot.
No protection against financial loss
Another consequence of expired car insurance is that you cannot make any claim in case of an accident. You will have to pay for the property damage and third-party injuries from your own pocket. In situations when both cars are damaged, you will face huge expenses.
It is a safer and cheaper option to buy car insurance instead of facing all the consequences listed above.
Impact on driving licence and vehicle registration
Driving with an expired licence is illegal. So, if you are caught by the authorities, you may face one of the following implications:
Potential licence suspension
In case traffic authorities catch you with an expired licence, they can temporarily suspend your licence. They generally take this action in case you have been a repeated offender.
RC implications and insurance blacklisting
Your car insurance is directly tied to its registration certificate. In case you have defaulted on the insurance renewal for a long time, the authorities can deny your RC renewal application.
Prolonged negligence can also result in the insurer blacklisting your vehicle. You may not be able to get insurance coverage easily. However, in certain situations, the company may ask for a vehicle inspection before reissuing the insurance. In that case, schedule the vehicle check as soon as possible for a smooth renewal process.
Future difficulty in renewing policies
In case your vehicle insurance expired, you are not eligible for a No Claim Bonus, and may have to:
- Pay a higher premium
- Get the vehicle inspected
- Face rejection from insurers
Consequences in case of an accident without insurance
The insurance company assesses the vehicle’s market value to find out its IDV (Insured Declared Value). It’s the maximum claim the company is willing to pay when you file for it. This amount helps save your money in case of an accident.
However, in case you don’t have car insurance, here is what will happen:
Full liability to others
If you hit someone (even accidentally), you will be responsible for paying for their vehicle damage and injuries. The entire financial burden will come on your shoulders, and you will not have insurance to fall back on.
Civil and criminal liability
Depending on the severity of the case, you will be charged with a civil or criminal offence. The third party that faced damages can file a legal complaint, and you have to bear the expenses and imprisonment (in extreme situations).
In case of death, your driver’s licence can be suspended if you don’t have active insurance.
Compensation through the Motor Accident Claims Tribunal (MACT)
You can claim compensation from the MACT; however, only if you are the victim and did not cause the accident. In this scenario, here is what will happen under Section 140:
- You can claim a fixed amount without proving that you weren’t negligent.
- You can receive higher compensation upon proving the third party’s negligence.
- You can get limited compensation if the at-fault vehicle cannot be located.
You must file the claim at the relevant Tribunal, where judicial officers will decide the issue.
Exceptions or Special Cases
In rare cases, you can be exempted from paying the penalty for expired insurance:
Grace period for renewal
The insurance company generally offers a grace period of 30 to 90 days. On the failure of which, the policy will lapse, and you may face a penalty.
Government-owned or exempt vehicles
Certain government and special-category vehicles are exempt from penalties:
- Public Works
- Police
- Fire services
- Politicians
- Army and defence vehicles operating in restricted zones
However, the exemption is temporary, and insurance renewal is still required.
How to Avoid Penalties?
Nobody wants to pay penalties, and here’s how you can save yourself from the same:
Always Renew Insurance on Time
Renew your insurance on time to avoid the remotest possibility of a fine or penalty. Set a reminder to receive an alert close to when your insurance is due to expire.
Opt for Long-Term Plans
Choose long-term comprehensive insurance plans for maximum coverage and ongoing protection. It may feel costly at first, but it provides better security.
Check Insurance Status Online via VAHAN or Insurer Websites
You can view your insurance status from VAHAN 4.0, the certified online app, or the official website/app of your insurance company.
Keep Proof of Insurance
Keep hard and soft copies of your car insurance with you at all times. These proofs ensure that regardless of when and why a traffic police officer stops you, you have valid documents with you.
Bottom Line
Driving without a valid car insurance is a punishable offence and can result in hefty fines, imprisonment, or vehicle impoundment. Ensure that you always have valid insurance and follow the traffic rules for stress-free driving.
When choosing car insurance, weigh the pros and cons of third-party and comprehensive policies to make an informed decision. In any case, don’t drive without renewing your insurance. It’s a safety net and mandatory for Indian roads.
Frequently Asked Questions
