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The Supreme Court has directed that the mandatory third-party insurance bought at the time of purchase be extended by one year for new vehicles.
New private cars must now carry four years of third-party cover instead of three, and new two-wheelers six years instead of five.
The Court directed the Insurance Regulatory and Development Authority of India to issue the necessary instructions immediately.
The bench cited the Report of the Standing Committee on Finance for 2024-25, which found that nearly 56% of vehicles on Indian roads are uninsured.
The Court also asked the Centre to run a pilot project denying fuel to vehicles without valid third-party insurance, and listed the matter for compliance on 18 August 2026.
Motor insurance has two distinct halves. Own-damage cover pays for harm to your own vehicle, and the law leaves that to your judgement — if you choose not to protect your car, only you bear the loss. Third-party cover pays compensation to someone else your vehicle injures or kills, or whose property it damages, and that is why the Motor Vehicles Act, 1988 makes it compulsory for every vehicle on a public road. The victim of a road accident has no say in whether the driver who hit them bought insurance, so the state substitutes its own decision for the owner's. The long-term bundling at the point of sale exists because of a simple behavioural problem: buyers renew enthusiastically in year one and forget by year three. Front-loading several years of cover into the purchase price removes the renewal decision altogether for the period when lapse is most likely, which is the logic the Court has now extended by a further year.
Simple Analogy: It is the difference between insuring your own house against fire and being required to insure against your bonfire burning down your neighbour's. Only one of those choices is purely yours to make.
The Motor Vehicles Act makes third-party insurance compulsory for every vehicle used in a public place
Long-term third-party cover becomes mandatory at the point of sale — three years for new cars and five years for new two-wheelers
The Standing Committee on Finance reports that nearly 56% of vehicles on Indian roads remain uninsured
The Supreme Court raises the mandatory period to four years for cars and six for two-wheelers, and directs IRDAI to issue instructions immediately
Deadline for stakeholders to file compliance affidavits
Matter listed before the Court for consideration of those affidavits
The statutory regulator of the insurance sector; it prescribes third-party premium rates and the mandatory cover periods that insurers and dealers must apply, and has been directed to issue instructions giving effect to this order
Administers the Motor Vehicles Act, 1988 and the road safety framework, including the vehicle registration and fitness systems that would have to support any fuel-insurance linkage
General Awareness > Insurance Awareness > Motor Insurance and IRDAI
GS Paper 2 > Government Policies and Interventions; Role of the Judiciary
General Awareness > Current Affairs > Judiciary and Regulation
General Awareness > Current Affairs > National
Cover that compensates a person other than the vehicle owner for injury, death or property damage caused by the vehicle; compulsory under the Motor Vehicles Act, 1988.
The optional component of a motor policy that pays for damage to the insured vehicle itself.
The Insurance Regulatory and Development Authority of India, the statutory insurance regulator, headquartered in Hyderabad.
The forum that adjudicates compensation claims arising from road accidents under the Motor Vehicles Act.
A multi-year third-party policy sold at the time of vehicle purchase, introduced to prevent early lapses in cover.