Explained: Supreme Court extends mandatory third-party motor insurance; what changes for car, two-wheeler owners?

The Supreme Court has extended the mandatory third-party motor insurance period for newly purchased vehicles by one year, in a move aimed at reducing the number of uninsured vehicles on Indian roads.

Under the new direction issued on August 4, 2026, buyers of new cars will have to purchase third-party insurance for four years while new two-wheelers will require third-party cover for six years. The court said the move was necessary in view of the large number of uninsured vehicles continuing to ply on Indian roads despite third-party motor insurance being mandatory under law.

The Bench of Justices Sanjay Karol and Prashant Kumar Mishra also proposed measures to identify uninsured vehicles, including linking insurance databases with vehicle registration systems and potentially restricting fuel purchases for vehicles without valid insurance.

What has the Supreme Court directed?

The court has directed that third-party insurance for newly purchased vehicles should provide coverage for four years for new cars and six years for new two-wheelers.

The Insurance Regulatory and Development Authority of India (IRDAI) has been directed to issue the necessary directions.

The court noted that IRDAI and the General Insurance Council had recommended against extending the existing coverage period. However, the Bench said extending the period by one year was in the interest of road safety.

Why has the court taken this step?

Third-party motor insurance is mandatory in India. However, the Supreme Court noted that more than half of the vehicles plying on Indian roads do not have a valid insurance policy. This creates a major problem for accident victims. If the vehicle responsible for an accident is uninsured, victims and their families can face significant difficulties in securing compensation.

The court observed that a "shocking" number of vehicles continue to operate without third-party insurance, leaving accident victims to "run from pillar to post" to obtain compensation. The issue is particularly significant given that India records more than four lakh road accidents on average every year, according to the court's observations.

What is third-party motor insurance?

Third-party insurance protects people other than the vehicle owner or driver from financial losses arising from an accident involving the insured vehicle.

For example, if a car causes an accident that injures another person or damages their property, the third-party insurance policy can cover the legal liability arising from the accident, subject to the terms and conditions of the policy. It is different from comprehensive motor insurance, which can also cover damage to the insured vehicle and other risks depending on the policy.

Why is third-party insurance mandatory?

Section 146 of the Motor Vehicles Act mandates insurance against third-party risks. It prohibits the use of a motor vehicle in a public place without a valid third-party insurance policy.

Section 147 specifies the requirements of such policies and the limits of liability, while Section 149 deals with the insurer's obligation to satisfy awards relating to third-party risks.

The Motor Vehicles Act also provides enforcement mechanisms against vehicles being operated without the required documents. Section 207, for instance, permits authorised authorities to seize and detain certain vehicles in specified circumstances.

How could uninsured vehicles be identified?

The Supreme Court has considered several technology-driven mechanisms to identify vehicles without valid insurance. These include:

ANPR cameras: Automatic Number Plate Recognition cameras installed on highways, toll plazas and city roads could be used to identify vehicles and check their insurance status.

mParivahan: State law-enforcement agencies could use the mParivahan application to identify uninsured vehicles and take action under the Motor Vehicles Act.

VAHAN and insurance databases: The vehicle registration database and the Insurance Information Bureau's database could be integrated to make it easier to identify vehicles without valid insurance.

Hand-held devices: Traffic police could use such devices to check insurance status and issue challans to violators.

Can vehicles without insurance be denied fuel?

The apex court has proposed a system under which vehicles without valid insurance could potentially be denied fuel at petrol pumps.

The idea is to use insurance verification as an additional enforcement mechanism. The court is examining such measures as part of its broader effort to improve compliance with mandatory insurance requirements.

The proposal would require an appropriate mechanism to verify a vehicle's insurance status at fuel stations before it can be implemented.

What is the penalty for driving without insurance?

The Supreme Court noted that Section 196 of the Motor Vehicles Act provides for a fine of ₹2,000 for a first violation and ₹4,000 for subsequent violations.

However, the court noted that the existing penalties have not had the desired deterrent effect and considered whether they should be increased.

What does this mean for vehicle owners?

For buyers of new vehicles, the immediate impact is that third-party insurance will have to be purchased for a longer period upfront—four years for new cars and six years for new two-wheelers, once the direction is implemented.

For existing vehicle owners, the larger significance lies in the proposed enforcement measures. Insurance status could increasingly be checked through number-plate recognition systems, vehicle databases and other digital platforms. This could make it harder for uninsured vehicles to operate without detection.

What does the insurance industry say?

Paras Pasricha, Business Head - Motor Insurance at Policybazaar, said the Supreme Court's directions seek to address the persistent problem of uninsured vehicles despite third-party insurance being mandatory.

"The direction to extend long-term third-party cover for new vehicles to four years for cars and six years for two-wheelers reinforces this objective by reducing the risk of policies lapsing in the initial years of ownership," Pasricha said, while adding that integrating ANPR cameras with the Insurance Information Bureau database and the VAHAN portal could help improve insurance penetration among existing uninsured vehicles.

"Mandatory third-party insurance exists to ensure that accident victims are not left without recourse because the at-fault vehicle is uninsured, and these directions could strengthen compliance and reduce instances where accident victims face prolonged litigation due to uninsured vehicles," he added.

According to Pasricha, greater consumer awareness about maintaining valid motor insurance will also remain important. Measures such as linking fuel purchases to insurance verification could serve both as an enforcement mechanism and a reminder for vehicle owners to keep their policies active.