SC extends third-party insurance for new vehicles to 4 years for cars, 6 for two-wheelers

The Supreme Court on Tuesday extended the mandatory third-party motor insurance coverage for new vehicles by one year, a decision that will require new cars to be insured for four years and two-wheelers for six years. The ruling modifies the earlier mandate of three years for cars and five years for two-wheelers set in a 2018 judgment.

A Bench of Justices Sanjay Karol and Prashant Kumar Mishra observed that a 'shocking' number of vehicles continue to operate without valid third-party insurance, leaving accident victims and their families with little recourse. 'They often have to run from pillar to post to secure compensation,' the court noted.

The court also suggested a mechanism to enforce compliance, proposing that fuel pumps be allowed to deny petrol to vehicles without valid insurance. However, it did not issue a formal direction on this matter, leaving it for consideration.

Despite recommendations from the Insurance Regulatory and Development Authority of India (IRDAI) and the General Insurance Council (GIC) against extending the coverage period, the court said an increase is in the interest of road safety. 'We are of the view that it is in the interest of road safety that the period be enhanced by one year,' the Bench stated.

The court directed IRDAI to issue necessary directions immediately. It also ordered the integration of Automatic Number Plate Recognition (ANPR) cameras with insurance data maintained by the Insurance Information Bureau of India (IIB) and vehicle registration records on the VAHAN portal. State police personnel are to be equipped with mobile applications linked to these databases to verify insurance status in real time and issue challans.

The directions came in an appeal filed by an insurance company challenging a 2024 Telangana High Court order to pay ₹10 lakh in compensation to the family of a road accident victim. The insurer argued that no additional premium was paid to cover the personal risk of the vehicle owner. The Supreme Court dismissed the appeal, observing that courts should not adopt a 'hyper-technical approach' in motor accident claims.

Justice Karol, who authored the judgment, highlighted the severe consequences of uninsured vehicles. 'The result of vehicles remaining uninsured is that the victims of the accident and their families have no recourse to adequate compensation, within a reasonable time period. They often have to enter into prolonged litigation concerning the quantum as well as liability for compensation,' he wrote.

The court also directed that vehicle buyers be offered a four-tier insurance policy at the time of purchase. This will include compulsory third-party insurance, optional coverage for passengers and pillion riders, personal accident cover for the owner, driver and occupants, and insurance against damage to the vehicle itself.

While the premium for the mandatory third-party component will be determined in consultation between IRDAI and the Centre, insurance companies will be free to set premiums for the optional components.

The judgment aims to balance the need for financial protection of accident victims with the practical realities of the Indian road transport sector.