IRDA Guidelines for Motor Insurance
Motor insurance in India is a legal necessity and a crucial financial safety net for vehicle owners. To regulate and standardise the motor insurance sector, the Insurance Regulatory and Development Authority of India (IRDAI) issues comprehensive guidelines. These rules ensure transparency, consumer protection, and uniformity across insurance providers. Understanding these guidelines helps policyholders make informed decisions and avoid future disputes.
What is Motor Insurance?
Motor insurance in India covers private cars, two‑wheelers, commercial vehicles, and other road‑going transport. Holding a valid motor insurance policy is mandatory under the Motor Vehicles Act, 1988, operating a vehicle without it is a penal offence. Valid insurance includes a Certificate of Insurance as per Rule 141 of the Central Motor Vehicles Rules, 1989.
IRDAI’s Role and Recent Developments
The Insurance Regulatory and Development Authority of India (IRDAI) regulates motor insurance products to ensure claim settlement efficiency, consumer protection, avoidance of malpractice, and an end to auto‑insurance fraud.
- Ajay Seth, former Finance Secretary, has been appointed IRDAI Chairman (three‑year tenure) as of 24 July 2025. This leadership update is guiding new regulatory momentum.
- FinMin has urged IRDAI to enhance claims settlement processes, grievance redressal and corporate governance across insurance products, including motor.
- Digital initiatives and broader inclusivity and transparency reforms in motor insurance are being driven by IRDAI via digital platforms.
What does Motor Insurance Offer?
A Motor Insurance policy offers comprehensive coverage to the policyholder against the following -
- Damages to the insured vehicle,
- Compensation for Third Party Liability against the vehicle owner inclusive of Third Party Property Damage
Types of Motor Insurance Policies in India:
- Third‑Party (Liability) Only – mandatory, covering legal liabilities against third‑party bodily injury or property damage. Compensation for property damage is capped at Rs.7.5 lakh.
2. Comprehensive (Package) Policy – optional but highly advisable. Covers:
- Third‑party liability
- Own‑damage (i.e. damage to your vehicle due to accidents, fire, theft, natural/man‑made disasters, etc.)
- Often includes add‑ons like Roadside Assistance, Zero Depreciation, Return-to-Invoice, Engine Protection, Consumables, Tyre Protect.
What are the IRDAI Rules for General Exclusions?
The following are the IRDAI rules for general exclusions:
- Criminal activity or illegal racing
- Damage caused to the vehicle because of not following the traffic rules
- Damage from driving under the influence of an intoxicating substance
- Damage to the car while driving outside the geographic area
- Damage caused to the vehicle when the policy was not active
- Any electrical or mechanical failure is not covered
- Intentional damage
- Regular wear and tear
IRDIA’s Rules for Premium, IDV and Depreciation
- Insured Declared Value (IDV): the insured value of the vehicle based on manufacturer’s price and age-related depreciation.
- Depreciation Schedule:
Up to 6 months | 5% |
6 months -1 year | 15% |
1 year - 2 years | 20% |
2 years - 3 years | 30% |
3 years - 4 years | 40% |
4 years - 5 years | 50% |
Total Loss: IRDAI considers a vehicle a “total loss” if repair costs exceed 75% of IDV.
Premium Determinants and Discounts for Motor Insurance
Premiums are impacted by:
- Vehicle details (age, engine capacity, IDV, class, location)
- Owner/driver profile (age, gender, driving history, claim history)
- Add‑ons chosen, voluntary and compulsory deductibles
Discounts:
- No Claim Bonus
- Membership in Automobile Association of India
- Use of ARAI‑approved anti‑theft devices
- Vintage/classic car certification
- Voluntary higher deductibles
- Concessions for users with disabilities
Customer Turnaround Times as Approved by the IRDA:
Issuance, processing and Cancellation of policies | 15 days |
Issuance of proposal copy | 30 days |
Services after issuance of policy/ Refund of proposal deposits/ Non-claim requests | 10 days |
Submission of survey report | 30 days |
Addendum Report for the insurer | 15 days |
Claims - settlement/rejection after the addendum report has been received | 30 days |
Acknowledgement of a grievance | 3 days |
Resolution of a grievance | 15 days |
No Claim Bonus (NCB) and Renewals in Motor Insurance
- Policyholders enjoy NCB benefits of 20% to 50% for claim‑free years on Own‑Damage premiums.
- NCB is lost if the policy is not renewed within 90 days of expiry or if a claim has been made.
- NCB is tied to the insured individual and cannot be transferred to the new owner of the vehicle but can be transferred between insurers upon renewal with proof.
Motor Insurance Policy Tenure and Renewal Process in India
- Motor policies are valid for one year. Renewal before expiry is essential to retain benefits such as NCB.
- Grace periods are not typically offered lapse often triggers re‑inspection and loss of NCB.
Documents Required to Be Kept in Insured Vehicles
The following are the documents required to be kept in insured vehicles:
- Certificate of Insurance
- Driving License - photocopy
- Registration Certificate - photocopy
Documents to Be Submitted While Making Motor Insurance Claims
The following are the documents required to be submitted while making motor insurance claims:
- Filled-in Claim Form
- RC book of the vehicle
- Estimate of Loss - Original
- Repair Invoice - Original
- Payment Receipt
For cashless settlements - Repair Invoice and FIR (if required)
For theft claims - Non-traceable certificate/ Keys of the stolen vehicle
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017
FAQs on IRDA Guidelines for Motor Insurance
- Can I get a vehicle insurance coverage straight from the insurance provider rather than a dealer?
Absolutely, since you receive value-added services, purchasing auto insurance directly from the insurance company is more advantageous than purchasing the policy through a dealer.
- What are the new regulations for auto insurance in 2023?
The Insurance Regulatory and Development Authority (IRDAI) of India requires Know Your Customer (KYC) authentication for all motor insurance clients starting on January 1, 2023. Verifying a customer's identification with Aadhaar-based KYC, Digital KYC, Video KYC, and Central KYC (CKYC) are all legitimate methods.
- What is the auto insurance policy?
Car insurance is a contract that covers loss or damage to the vehicle and is signed by the owner of the vehicle and the insurance company. The owner of the vehicle pays the premiums. Regardless of whether it is a personal or business car, auto insurance is required in India.
- Is a three-year policy for third-party auto insurance required?
The Indian traffic rules require that you have third-party auto insurance. But the harm your car causes to other parties is the only thing this coverage will cover. Hence, it is recommended you go for a comprehensive car insurance scheme.
- Can I get auto insurance after 15 years?
The cost of repairs and depreciation may surpass the car's value as its value declines over time. Therefore, take these things into account before buying comprehensive auto insurance, as most insurance providers do not offer package auto insurance after the car has turned 15 years or more.
- Which kind of auto insurance is the best?
Complete Auto Insurance. Because it includes third-party liability, damage to one's own vehicle, personal accident coverage, and all non-collision damage including storms, floods, fires, and theft, this kind of auto insurance offers the highest level of protection.
- What is auto insurance with zero percent depreciation?
If you get a zero percent cover as an add-on for your auto insurance, you will not be charged any fee for depreciation when your claim is settled. Put simply, you can make a claim without having to pay the depreciation expense. Both personal injury and harm done to a third party are covered under a comprehensive policy.
- What is the longest that auto insurance may last?
Unless you have chosen a multi-year policy, the policy period is typically one year. General insurance companies are now permitted to offer multi-year or long-term auto insurance policies for a maximum of three years, according to the Insurance Regulatory and Development Authority of India (IRDAI).
- For a car, is zero depreciation required?
Choosing zero depreciation insurance makes sense if you drive an expensive car. Inexperienced drivers are more prone to be involved in collisions and are thus more likely to file a claim. But they might have to pay a lot of money if they don't have zero depreciation insurance!
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