Chapter 11 of 12
Motor Insurance — TP vs Comprehensive
Legal requirements, coverage types, and reducing premiums.
Suresh bought a brand new Swift Dzire for ₹9.5 lakh. At the showroom, the finance
executive said: "Sir, motor insurance is mandatory. You want third-party only or
comprehensive?" Suresh chose third-party because it was cheaper — ₹2,100 vs ₹14,000.
Four months later, a pothole caused his car to skid and hit a wall. ₹85,000 repair bill.
Third-party insurance doesn't cover damage to your own car — only to others you damage.
Suresh paid the full ₹85,000 himself. Understanding the different types of motor
insurance would have saved him more than the ₹12,000 he tried to save on premium.
What the Law Requires vs What You Actually Need
Third-Party Only vs Comprehensive
Annual motor insurance costs (approximate, Delhi registration, new car):
- Third-party only: ₹2,094/year (IRDAI-fixed rate; same for allinsurers)
- Comprehensive (TP + OD): ₹12,000–15,000/year depending oninsurer, add-ons, and city
- Comprehensive + Zero Depreciation add-on: ₹14,000–18,000/year
Difference: ~₹12,000/year. A single accident requiring replacement of bumper,
headlights, and front panel on a new car can easily cost ₹80,000–1,50,000.
For a new car, comprehensive is almost always worth it.
| Coverage | Third-Party Only | Comprehensive |
|---|---|---|
| Damage to your own car (accident) | ✗ Not covered | ✓ Covered per IDV |
| Damage to third-party vehicle | ✓ Covered | ✓ Covered |
| Third-party injury/death liability | ✓ Covered (unlimited) | ✓ Covered (unlimited) |
| Theft of own car | ✗ Not covered | ✓ Covered up to IDV |
| Natural calamity damage (flood/fire) | ✗ Not covered | ✓ Covered |
| Annual premium (₹10L new car) | ~₹2,100/year | ~₹12,000–15,000/year |
| Is it mandatory by law? | ✓ Yes | TP component mandatory; OD optional |
No Claim Bonus — Up to 50% Discount
Starting OD premium: ₹10,000/year. No claims made over 5 years.
- Year 1 (new policy): No NCB. OD premium: ₹10,000
- Year 2 (after 1 claim-free year): 20% NCB. OD premium: ₹8,000
- Year 3: 25% NCB. OD premium: ₹7,500
- Year 4: 35% NCB. OD premium: ₹6,500
- Year 5: 45% NCB. OD premium: ₹5,500
- Year 6 (after 5 claim-free years): 50% NCB. OD premium: ₹5,000
- Total saved over 5 years vs paying without NCB: approximately ₹17,500
Important: Filing a claim resets your NCB to zero. For minor damages under ₹15,000–20,000, it often pays to cover repairs yourself and protect your NCB —
especially if you're close to the 50% discount tier.
Add-ons Worth Considering
Zero Depreciation (Nil Dep) — Highly Recommended for New Cars: Without it, if your 3-year-old car's bumper (depreciation 50%) is replaced in a claim, you receive only ₹7,500 for a ₹15,000 part. With zero dep, you get ₹15,000. Costs ₹1,500–3,000 extra per year.
Engine Protection — Recommended in Flood-Prone Cities: Covers engine damage from water ingression (hydrostatic lock) — not usually covered in standard OD. Critical in Mumbai, Chennai, Hyderabad, Kolkata.
Roadside Assistance (RSA): Covers towing, battery jump-start, flat tyre assistance, emergency fuel. Useful but not critical. Costs ₹300–800/year.
Return to Invoice: In case of total loss or theft, insurer pays the original invoice price (not depreciated IDV). Worth it for new cars in high-theft areas.
If your car is 8–10 years old with an IDV of ₹1.5–2 lakh, the comprehensive premium (₹5,000–8,000/year) starts approaching the car's own value. At that point, calculate: if the car is damaged beyond repair, will the IDV payout justify the extra premium paid over multiple years? For old cars, third-party only may be sufficient — but never skip it.
For cars under 5 years old, zero depreciation add-on significantly increases claim payouts by removing depreciation deductions on parts. Given that new car parts are expensive and depreciation rates are high (30–50% on plastic parts), the add-on typically pays for itself in a single claim. Drop it after year 5 when IDV is lower.
Which type of motor insurance is legally mandatory for all vehicles in India?
Key Takeaways
- Third-party insurance is legally mandatory; comprehensive (TP + OD) is optional but strongly recommended for cars under 8–10 years old
- Build your NCB — 5 claim-free years give a 50% discount on OD premium; avoid small claims that reset the NCB to zero
- Add zero depreciation cover for new cars — prevents heavy depreciation deductions on parts during claims, typically paying for itself in one incident
- For cars worth less than ₹2 lakh (old vehicles), evaluate whether comprehensive premium is justified given the low IDV payout ceiling