Third-Party Car Insurance Set to Rise 10-25%

For the first time in six years, the price of the one insurance every vehicle owner in India is legally required to carry is set to move. Third-party motor insurance premiums have been frozen since the 2019-20 financial year, and the insurance regulator, together with the road transport ministry, is now finalising a revision estimated at 10 to 25 percent for the 2026-27 financial year, with implementation flagged from around April 2026 onward. It is not law yet — the numbers are still being worked through — but for anyone who owns a car, or is about to buy a used one, it is a change worth budgeting for now rather than being surprised by at renewal.

Third-party cover is the portion of a motor policy that pays for injury or damage your vehicle causes to other people, their vehicles or their property. Under the Motor Vehicles Act it is compulsory for every vehicle on an Indian road — you cannot legally drive without it. Because it is mandatory, its price is not left to the market: the regulator sets a single fixed rate for each engine band, and that rate applies identically to every owner regardless of which insurer they buy from. That is why a revision decided at the top filters straight down to every driveway in the country at the same time.

Right now those fixed rates sit at roughly Rs 2,100 a year for a car up to 1,000cc and roughly Rs 3,400 a year for one in the 1,000 to 1,500cc band, which covers the bulk of India's popular hatchbacks and compact SUVs. A 10 to 25 percent rise lands directly on top of that figure. And it does not stop at your own car: if you are shopping for a used vehicle, the renewal you inherit will be at the new, higher rate too — which makes checking a car's current insurance status before you pay more important than it has been in years.

Six Years Frozen, and Why the Freeze Is Ending

Third-party rates in India are reviewed by the regulator, historically on a near-annual basis. That cadence stopped after the 2019-20 financial year, and the fixed premiums have stood still ever since — roughly six years without a change. In a period where the cost of vehicle repairs, medical treatment and legal awards has kept climbing, a static premium eventually stops matching the real cost of the claims it is meant to fund. A revision, when it comes, is essentially the system catching up on years of held-back adjustment in one step.

That is the important nuance for owners. Because the increase reflects several years of frozen rates rather than a single year's inflation, it is being framed as a one-time reset in a wide 10 to 25 percent band rather than a small annual tick. It is also why the change is being reported as significant even though third-party is only one part of your total premium. For most private-car owners, third-party is the smaller line item; the own-damage cover, driven by the car's Insured Declared Value, is usually the larger one. If that term is unfamiliar, our guide to IDV explained for a used car shows how the two halves add up to the number you actually pay.

How Much More You Could Pay

Until the regulator notifies the final rates, the honest answer is a range, not a number. What we can do is apply the expected 10 to 25 percent band to the current fixed premiums to see the shape of the change. The table below is illustrative — it takes the stated current rates and shows where they would sit at the bottom and top of the expected range. Treat the middle two columns as scenarios, not quotes.

Illustrative only — figures apply the expected 10-25% range to the stated current fixed rates. Final rates will be confirmed by the regulator when the revision is notified.

In rupee terms the annual difference for a private-car owner is modest — tens to a few hundred rupees a year on the third-party line. The point is not the size of any single renewal; it is that the increase is permanent, it stacks on top of every other running cost, and for a used-car buyer it arrives immediately rather than at some distant future renewal.

What This Means for Used-Car Buyers

If you already own your car, the hike is a line item you absorb at your next renewal. If you are buying a used car, it changes the maths of the purchase itself. Insurance is one of the fixed, unavoidable costs of putting a vehicle on the road — sitting alongside fuel, maintenance and road tax — and a rise of 10 to 25 percent on the mandatory portion nudges the true cost of ownership up for every used car on the market, not just the shiny new ones.

The trap is that buyers tend to negotiate hard on the sticker price and then treat everything after as an afterthought. In reality, the running costs decide whether a car is genuinely affordable. A used car that looks like a bargain on price can quietly cost more to keep on the road than a slightly dearer one with a larger, thirstier engine, higher road tax and — now — a heavier third-party premium. The engine band that sets your insurance rate is the same band that shapes your fuel bill, so it pays to think about the whole picture before you fall for a headline price. Our breakdown of what a 15 to 20-year-old car really costs to run shows how sharply those hidden line items can add up on an older vehicle.

The No-Claim Bonus Does Not Come With the Car

Here is the part that catches most first-time used-car buyers off guard. A No-Claim Bonus — the discount that builds up for every year you do not make a claim — belongs to the person, not the vehicle. It rewards an individual driver for a clean record and moves with them to their next car. It does not transfer to whoever buys their old one.

So when you buy a second-hand car, you generally start a fresh policy in your own name, without the previous owner's accumulated discount. That means your first year of cover is at the full applicable rate — and with third-party premiums set to rise, the full rate is going up. If the seller has been quoting you the low premium they pay because of years of no-claim discount, that is not the number you will face. Assume a full-price renewal from day one and build it into your budget. When you are deciding whether to keep an inherited policy or start clean, our comparison of renewing versus taking a new policy walks through which route usually works out cheaper for a used-car buyer.

Check the Policy Before You Pay, Not After

All of this points to one practical habit that becomes more valuable the moment rates rise: check a used car's insurance status before you hand over money, not after. An expired policy, or one that is third-party-only with no own-damage cover, becomes your out-of-pocket problem the day you take the keys — and now at the new, higher renewal rate.

The cleanest way to see what you are inheriting is to check the car's registration status, insurance validity and key records on the government VAHAN database. That tells you whether the cover is live, when it expires and what type it is, so you can price the renewal into your offer and negotiate with facts rather than the seller's word. It also surfaces the kind of paperwork gaps that quietly wreck deals later — the same gaps that lead to claims being rejected when an owner assumes cover is in place and finds out too late that it lapsed. VahanBazaar's Vahan Verify tool pulls exactly these records for Rs 49, so you can budget the renewal correctly before you commit.

Budgeting a Used Car's True Running Cost

The insurance revision is a useful prompt to add up what a car actually costs to keep, rather than just what it costs to buy. For any used car you are seriously considering, tot up the mandatory and recurring lines together: the third-party premium for its engine band, the own-damage cover based on its Insured Declared Value, road tax status, expected fuel spend and routine maintenance. That combined figure — not the negotiated sticker price — is what tells you whether the car fits your budget month after month.

Do that exercise before the third-party rates are notified and you build in a margin of safety; the small increase is already baked into your thinking. Skip it, and a modest, entirely predictable rise turns into an unwelcome surprise on a renewal notice. The premium change itself is minor in rupee terms for most private cars. The real value is in the habit it encourages: buy on the full cost of ownership, verify the paperwork before you pay, and never assume the cheap premium a seller quotes is the one you will actually inherit.