#AD
The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory body responsible for regulating the insurance sector, including motor cover. Its rules for Car Insurance are designed to standardise practices across insurers, protect policyholders, and keep the claims process transparent. Understanding these rules helps vehicle owners choose the right cover, avoid gaps in protection, and know what to expect if they ever need to make a claim. Since the framework applies uniformly across insurers, it also gives owners a consistent basis for comparing policies rather than relying solely on marketing material.
What IRDAI Rules Cover
IRDAI regulations touch nearly every stage of a motor policy, including:
- Mandatory third-party liability cover for every vehicle on the road
- Guidelines for wider, all-round cover that includes own-damage protection
- Premium calculation methods based on standardised factors
- Claim settlement procedures and timelines
- Renewal norms and No Claim Bonus (NCB) rules
- Grievance redressal mechanisms for policyholders
These rules are updated periodically to reflect market conditions, technology, and requirements under the Motor Vehicles Act, 1988, so it is worth checking for the latest version before buying or renewing a policy.
Mandatory Third-Party Cover
Under the Motor Vehicles Act, every vehicle used in a public place must carry valid 3rd party car insurance. This cover is compulsory, not optional, and includes:
- Legal liability for death or injury caused to third parties
- Property damage compensation up to Rs 7.5 lakh
- Personal Accident cover for individuals employed to operate the vehicle
- Legal expenses arising from third-party claims
Premiums for this segment are fixed by IRDAI based on vehicle category and engine capacity, rather than being set independently by each insurer. New private cars must currently carry three years of mandatory third-party cover, with the option to add an annual own-damage policy alongside it.
How Premiums Are Calculated
IRDAI-approved norms consider several factors when arriving at a premium:
| Factor | How It Affects Premium |
|---|---|
| Insured Declared Value (IDV) | Higher IDV increases the own-damage premium |
| Vehicle age | Older vehicles generally attract higher premiums |
| Registration location | City-level accident and theft statistics play a role |
| Engine capacity | Larger engines attract higher third-party tariffs |
| No Claim Bonus (NCB) | Discounts apply for claim-free renewals |
| Add-ons | Optional covers such as zero depreciation add to cost |
| GST | Charged at 18% on the total premium |
IDV itself is based on the manufacturer’s listed selling price minus a fixed depreciation rate tied to the age of the vehicle, ranging from 5% for cars under six months old to 50% for cars between four and five years old.
Claim and Grievance Timelines
IRDAI mandates specific timelines to keep the claims process predictable:
| Activity | Timeline |
|---|---|
| Surveyor appointment | Within 24 to 72 hours |
| Survey completion | Within 48 hours of appointment |
| Survey report submission | Within 15 days |
| Claim settlement or rejection | Within 30 days of documents received |
| Grievance acknowledgement | Within 3 days |
| Grievance resolution | Within 15 days |
For total loss claims, where repair cost exceeds 75% of the IDV, insurers settle based on IDV minus salvage value, and the vehicle’s Registration Certificate must be cancelled as part of the process.
Renewal, NCB, and Deductibles
A few rules are worth keeping in mind at renewal time:
- Renewing within 90 days of expiry preserves the No Claim Bonus; beyond that, the bonus is lost and a fresh inspection may be required
- Standalone own-damage policies cannot run longer than the linked third-party policy
- Standard deductibles apply during claims: Rs 1,000 for cars up to 1500cc and Rs 2,000 for cars above 1500cc
- Passenger cover of at least Rs 25,000 per occupant is recommended for all vehicles
General Exclusions
Certain situations fall outside standard cover under IRDAI norms, including:
- Wear and tear, or mechanical and electrical failure
- Damage linked to illegal activity, such as racing or drink-driving
- Use of the vehicle outside India
- War or nuclear risks, unless a specific add-on is purchased
- Use of the vehicle without a valid licence
Review your policy exclusions carefully before purchasing or renewing your motor insurance, as a higher IDV does not override the standard terms, conditions, and exclusions of the policy.
Why These Rules Matter
For most vehicle owners, IRDAI’s rules translate into a more predictable and transparent buying experience, since every insurer works within the same broad framework rather than setting entirely separate standards. Standardised deductibles and a uniform NCB grid make it easier to compare options when shopping for Car Insurance across different providers, while fixed timelines for surveys and settlements reduce uncertainty during a claim. Whether choosing basic 3rd party car insurance or a wider policy with own-damage protection, understanding these regulations puts vehicle owners in a stronger position to select appropriate cover, renew on time, and know what documentation to expect at each stage of a claim. Reading the official policy wording alongside IRDAI’s published guidelines remains the most reliable way to confirm exactly what a Car Insurance policy includes before it is needed.
