Car insurance in India, explained
Motor insurance in India has two parts — a legally mandatory third-party cover and optional own-damage cover. Once you understand IDV, No-Claim Bonus, and GST, your premium stops being a mystery.
The two parts of a motor policy
Third-party (TP) cover is mandatory by law. It pays for injury or damage you cause to other people, vehicles, or property — but nothing for your own car. Its price is set by the regulator based on engine capacity.
Own-damage (OD) cover is optional and pays for damage to your own vehicle from accidents, theft, fire, or natural calamities. A comprehensive policy is simply TP + OD together.
IDV — the number everything hangs on
IDV (Insured Declared Value) is the current market value of your vehicle and the maximum a comprehensive policy pays if it’s stolen or written off. Your own-damage premium is calculated as a percentage of IDV, so a higher IDV means a higher premium but a bigger payout. IDV falls every year as the car depreciates.
No-Claim Bonus (NCB)
NCB is a discount on the own-damage part of your premium for every claim-free year, rising from 20% after year one up to 50%. It applies only to OD, never to the statutory third-party premium. Make a claim and it resets — which is why it’s often cheaper to pay for a small dent yourself than to claim and lose the bonus. An NCB-protect add-on can preserve it through one claim.
Estimate your motor premium in ₹
Enter your IDV, vehicle age, and NCB to see own-damage, third-party, and 18% GST add up to a total premium.
How the premium adds up (with GST)
The final premium is the own-damage premium (after NCB) plus the third-party premium, plus 18% GST on the total. For a ₹6 lakh car, three years old, with a 25% NCB in a metro:
| Component | Amount |
|---|---|
| Own-damage premium | ₹13,734 |
| No-Claim Bonus (25%) | −₹3,433 |
| Third-party premium | ₹2,094 |
| GST (18%) | ₹2,231 |
| Total premium | ≈ ₹14,626 |
How to lower your premium (legitimately)
- Protect your NCB — don’t claim for small, cheap-to-fix damage.
- Choose a sensible voluntary deductible if you’re a careful driver.
- Keep IDV accurate rather than inflated, but don’t under-declare it.
- Drop add-ons you don’t need, and compare insurers at renewal.
Add-ons worth knowing
- Zero-depreciation — full part-replacement value on claims.
- Engine protection — valuable in flood-prone areas.
- Roadside assistance and consumables cover.
- NCB protect — keeps your bonus through a claim.
Frequently asked questions
It's the legal minimum, but it only pays for damage or injury you cause to others — nothing for your own vehicle if it's damaged or stolen. If your car has meaningful value, comprehensive cover (third-party plus own-damage) is usually worth the extra.
No. IDV is the maximum you'd receive if the car is stolen or written off. Declaring a lower IDV shaves a little off the premium but cuts your payout and can complicate claims. Keep IDV close to the true market value.
Yes. NCB attaches to you, the owner, not the vehicle — so when you sell and buy a new car you can carry the accumulated discount across. It can also transfer between insurers when you switch.
A popular add-on that pays the full cost of replaced parts on a claim without deducting for depreciation. It raises the premium but sharply increases what you receive on a claim — most valuable for newer cars.