Motor insurance is the one running cost no car owner in India can legally avoid — and it is about to get more expensive. A proposal being considered by the Ministry of Road Transport and Highways (MoRTH) would raise third-party (TP) motor insurance premiums by an estimated 18 to 25 percent in FY 2025-26. At the same time, the insurance regulator IRDAI has rolled out 2026 guidelines that reshape how own damage cover, No Claim Bonus, and policy structure work. For anyone buying a car this year — and especially a used car — these two changes alter both what you pay and how you should budget. This article breaks down the proposed slabs, the new rules, and the one verification step that lets a used-car buyer see the insurance status before paying a rupee.
The Proposed 18-25% Hike — What Is Actually on the Table
Third-party motor insurance premiums in India are not set by individual insurers. They are fixed centrally and revised periodically, with the Ministry of Road Transport and Highways and the insurance regulator IRDAI playing the lead roles in setting the rates. The figure making news for FY 2025-26 is an estimated 18 to 25 percent increase in TP premiums — a proposal currently under consideration, not a notified final rate.
It is important to read that sentence precisely. As of now, nothing has been formally notified. The 18 to 25 percent band is the range being discussed, and until MoRTH issues a revised tariff, the existing premiums continue to apply. For a car owner planning the year's expenses, the sensible approach is to assume the increase will land somewhere in that range, budget toward the upper end to avoid a surprise, and treat the lower end as the optimistic case.
Why is the increase being proposed at all? Third-party premiums are designed to keep pace with the rising cost of injury and death claims — medical inflation, court-awarded compensation under the Motor Vehicles Act, and the general increase in repair and liability costs over time. TP premiums in India had been held flat for an extended stretch, so a periodic catch-up revision is consistent with how the system is meant to work. The regulator and insurers are not the villains here; they are recalibrating a mandatory cover whose claim outflows have outpaced its premium intake.
Read it as a proposal, not a bill: Treat the 18 to 25 percent figure as the estimated range under MoRTH consideration for FY 2025-26. Until the revised slabs are formally notified, the current premiums apply. Budget for the upper end of the range so a notification, whenever it comes, does not catch you short.
Current TP Slabs vs Estimated Post-Hike Premiums
Third-party premiums for private cars are slabbed by engine capacity. The current annual base TP premium for a petrol or diesel private car is up to Rs. 2,094 for engines up to 1000cc, Rs. 3,416 for engines between 1000cc and 1500cc, and a higher slab for engines above 1500cc. The table below shows those confirmed current figures alongside estimated post-hike premiums derived by applying the proposed 18 to 25 percent range to the base figures. The post-hike columns are estimates only — they are not official rates, and they exist to help you visualise the budget impact.
| Engine Capacity | Current Base TP Premium | Estimated at +18% | Estimated at +25% |
|---|---|---|---|
| Up to 1000cc | Rs. 2,094 | Approx. Rs. 2,471 (estimated) | Approx. Rs. 2,618 (estimated) |
| 1000cc to 1500cc | Rs. 3,416 | Approx. Rs. 4,031 (estimated) | Approx. Rs. 4,270 (estimated) |
| Above 1500cc | A higher slab | Higher slab + 18% (estimated) | Higher slab + 25% (estimated) |
A few things to keep in mind when reading the table. First, these are base third-party figures only. They do not include the own damage premium you pay if you take comprehensive cover, the 18 percent GST applied on top, or any add-on covers. Second, the post-hike numbers are simple percentage extrapolations of the confirmed base figures — the actual notified slabs, if and when they arrive, may differ. Third, the above-1500cc slab is left descriptive because the exact current figure for that band has not been confirmed here; do not infer a specific number for it.
Where the real money is: For most mainstream cars, third-party is the smaller part of your insurance bill — the own damage premium, which scales with the car's insured value, usually dominates. A TP hike of a few hundred rupees matters most for older or smaller cars carried on third-party-only policies, where TP is effectively the whole premium. For a comprehensive policy on a newer car, the TP increase is a modest line item within a larger total.
What the IRDAI 2026 Guidelines Change for Buyers
Running parallel to the TP revision, IRDAI's 2026 guidelines change the structure of motor insurance in ways that are genuinely buyer-friendly. Two changes stand out, and both reward owners who understand how the pieces fit together.
The first is the option to buy an annual Own Damage (OD) cover separately, alongside a longer three-year third-party policy. This decouples the two halves of a comprehensive policy. You keep the legally mandated third-party cover running on a multi-year basis, while choosing your own-damage protection on a yearly cycle — which lets you shop the OD portion competitively, adjust the insured value as the car depreciates, and switch insurers for the OD cover without disturbing the mandatory TP component.
The second is a uniform No Claim Bonus (NCB) grid across insurers. Historically, the way NCB was displayed and applied could vary in presentation between companies, which made it harder for owners to compare offers and to carry their accumulated discount across on renewal. A uniform grid makes the NCB ladder consistent and the discount easier to understand — and, critically, easier to transfer between insurers when you renew, as long as you carry proof of your existing bonus.
OD-TP can be split
Buy a 3-year third-party policy and an annual own damage cover separately. Shop the OD portion yearly without disturbing the mandatory TP component.
Uniform NCB grid
A consistent No Claim Bonus ladder across insurers makes the discount easier to read and easier to transfer on renewal with proof.
NCB follows the person
Your No Claim Bonus is tied to you, the insured individual — not to the vehicle. It transfers between insurers for the same person, not to a car's new owner.
TP stays mandatory
Third-party cover remains legally compulsory under the Motor Vehicles Act 1988. Driving without it is an offence, whatever the OD arrangement.
The Used-Car Trap: NCB Does Not Transfer With the Car
This is the single most misunderstood point in used-car insurance, and the proposed premium hike makes it matter more than ever. When you buy a used car, the seller's No Claim Bonus does not come with the vehicle. NCB is tied to the insured individual, not to the metal. The seller earned that discount through their own claim-free history, and they can carry it to a new policy on their next car — between insurers, on renewal, with proof. As the buyer, you do not inherit it.
The practical consequence is that you must budget the full third-party and own damage premium for the car you are buying, without assuming any discount from the previous owner. If you have your own NCB from a car you previously owned and insured, you may be able to apply that to the new vehicle — but the seller's bonus is theirs to keep, not yours to receive. Anyone who tells you "the insurance is fully paid and the no-claim bonus comes with it" is misunderstanding, or misrepresenting, how the system works.
There is a second used-car rule worth knowing. When vehicle ownership is transferred, the existing insurance policy cannot simply be cancelled unless there is evidence that the vehicle is insured elsewhere. This protects against a car being left uninsured during the transfer window — a sensible safeguard, since third-party cover is mandatory at all times. In practice it means the cover on the car continues to exist through the handover, but the financial benefits attached to the seller as a person — the NCB above all — do not pass to you.
Budget the real number: When you price a used car, add the cost of fresh own damage cover plus the current third-party premium for its engine slab — with zero NCB discount assumed from the seller. If the proposed hike is notified, build in the upper end of the 18 to 25 percent range on the TP portion. Knowing this before you negotiate keeps the insurance line in your total cost of ownership honest. Our deep-dive on engine protect, return-to-invoice and consumables add-on covers explains which optional covers are worth the premium and which are not.
Buying a used car this year?
Run Vahan Verify (Rs. 49) before any deposit to see the insurer and insurance validity on the VAHAN record. Then you can budget the new third-party and own damage premium accurately — including the fact that the seller's NCB will not carry over.
How to See a Used Car's Insurance Status Before You Pay
Here is where the cost story and the verification story meet. Before you commit to a used car, you want to know three insurance facts: who the current insurer is, whether the cover is live or lapsed, and what your new premium will be. The first two are visible on the VAHAN record. The third you can calculate once you have the slab and have accepted that no NCB carries over.
A Vahan Verify report at Rs. 49 pulls the VAHAN database record and returns, among other fields, the insurance company on file and the insurance validity date — alongside RC status, registered owner, and hypothecation. That tells you immediately whether the policy is current or has lapsed, who the insurer is, and whether the car carries an active loan that affects the transfer. If the validity date has passed, you know the car needs fresh cover from day one and you can build that into your offer. If it is current, you know the cover continues through the transfer window under the rule described above — but you still budget your own premium, because the NCB will not follow.
For a full field-by-field walkthrough of what the report shows and how to read each line, our explainer on what the Rs. 49 Vahan Verify report shows you covers every field including the insurance company and validity date. The point for this article is narrow and practical: the insurance status is not something you should take the seller's word for. It is on the national record, and a Rs. 49 lookup puts it in front of you before any money changes hands.
The order of operations: Step 1 — Vahan Verify the registration to read the insurer, insurance validity, RC status and hypothecation. Step 2 — price the car including a fresh third-party premium for its engine slab (upper end of the proposed range) plus own damage cover, with no NCB discount assumed. Step 3 — only then negotiate. Knowing the true insurance cost upfront is leverage, not paperwork.
What This Means for Used Car Buyers and Sellers
For buyers, the FY26 changes sharpen one habit: price the insurance honestly before you commit. The proposed 18 to 25 percent third-party hike, combined with the rule that the seller's NCB does not transfer, means the insurance line in your total cost of ownership is larger and less negotiable than many buyers assume. The cars most affected are smaller and older vehicles run on third-party-only policies, where the TP premium is effectively the whole bill. Treat the third-party premium as a fixed, mandatory cost — slabbed by engine capacity, rising this year, and payable regardless of the seller's history.
For sellers, the news is gentler than it sounds. Your No Claim Bonus is an asset you keep — it moves with you to your next car, between insurers, on renewal with proof. Selling the car does not forfeit the discount you earned. What you should not do is promise the buyer a benefit that legally cannot transfer; setting that expectation correctly avoids a dispute at handover. A clean, current insurance record on the VAHAN database is, however, a genuine selling point: it signals a well-maintained, properly documented vehicle, and buyers who run a verification check will see it.
For the wider market, the direction is toward transparency. The IRDAI 2026 guidelines — separable OD cover, a uniform NCB grid, clearer transfer rules — all push insurance toward something an ordinary owner can actually understand and compare. The regulator, the insurers, and the digital aggregators that let buyers compare quotes are all part of that shift. The role of a verification check is complementary: it tells a used-car buyer the starting position — current insurer, validity, loan status — so that the comparison they run for their own new policy starts from facts, not from the seller's say-so.
The Two-Step Check Before You Buy
The lighter, cost-focused version of the buyer's drill has two steps. First, Vahan Verify at Rs. 49 covers the paper and status layer — RC status, registered owner, hypothecation, and the two insurance fields that matter most here: the insurer on file and the insurance validity date. That single 60-second report lets you budget the new premium accurately and confirm the car is not carrying a surprise lapse or an active loan.
Second, for the condition layer, an AI Vahan Inspection at Rs. 249 reads paint thickness across the panels, runs OBD-II diagnostics for live engine and transmission fault codes, and for EVs reads the battery State of Health. Used in sequence — Vahan Verify before the deposit, AI Vahan Inspection before the balance — the two tools cost Rs. 298 together. Against a used-car transaction worth several lakh rupees, and an insurance bill that is rising this year, that is a small price to start the deal from verified facts rather than assumptions.
Know the Insurance Status Before You Pay
Vahan Verify (Rs. 49) returns a plain-English VAHAN database report in under 60 seconds — insurer, insurance validity, RC status, owner, hypothecation. AI Vahan Inspection (Rs. 249) covers paint thickness, OBD-II diagnostics, and EV battery SoH. Together they cost Rs. 298 — so you budget the new premium from facts, not guesswork.
Frequently Asked Questions
No. As of now, the 18 to 25 percent increase in third-party motor insurance premiums is a proposal under consideration by the Ministry of Road Transport and Highways (MoRTH), not a confirmed or notified final rate. Third-party rates in India are set centrally and are revised periodically. Until MoRTH formally notifies the revised slabs, the current premiums continue to apply. Treat the 18 to 25 percent figure as the estimated range being discussed, and budget for the upper end to be safe.
For private cars running on petrol or diesel, the current annual third-party base premium is up to Rs. 2,094 for engines up to 1000cc, Rs. 3,416 for engines between 1000cc and 1500cc, and a higher slab for engines above 1500cc. These are the base third-party figures only — your final invoice also includes own damage premium (if you take comprehensive cover), GST, and any add-on covers you choose. If the proposed hike is notified, each slab would rise by the applicable percentage in the 18 to 25 percent range.
No. No Claim Bonus (NCB) is tied to the insured individual, not to the vehicle. When you buy a used car, the previous owner's NCB does not carry over to you. The seller can transfer their own NCB to a new policy on their next car, between insurers, on renewal with proof. As the buyer, you start fresh on the NCB ladder for that vehicle unless you have your own existing NCB from a previous car that you can carry across. This is why you should budget for the full third-party and own damage premium without assuming any NCB discount from the seller.
Yes. Under IRDAI rules, your No Claim Bonus is portable between insurers for the same individual. When you renew your policy with a different company, you produce proof of your existing NCB — typically the previous policy and a renewal notice or NCB confirmation — and the new insurer honours the accumulated discount. IRDAI's 2026 guidelines aim to make this simpler by introducing a uniform NCB grid across insurers, which makes the discount easier to understand and to transfer on renewal. NCB transfers with the person, not with the car.
Run a Vahan Verify report at Rs. 49 before you pay any deposit. The report pulls the VAHAN database record and shows the insurance company and insurance validity date on file, alongside RC status, registered owner, and hypothecation. That tells you whether the cover is live or lapsed, who the current insurer is, and lets you budget the new third-party and own damage premium you will need to pay on transfer — including the fact that the seller's NCB will not carry over to you. Verifying the insurance status before purchase prevents the unpleasant surprise of buying a car with lapsed cover and an unexpected premium bill.