Section 146 of the Motor Vehicles Act, 1988 makes third-party liability insurance compulsory for every motor vehicle used in a public place in India, and driving or using a vehicle without at least this minimum cover is a punishable offence. Third-party cover pays compensation to a third party -- another driver, pedestrian, or property owner -- injured or whose property is damaged by the insured vehicle; it does not cover damage to the insured's own vehicle, for which separate own-damage (comprehensive) cover is needed. NRIs who own a vehicle in India, or whose family operates a vehicle registered in an NRI's name, should confirm that third-party cover is current at all times, since claims against an uninsured or under-insured vehicle can create personal liability well beyond what compensation the victim ultimately recovers from an insurer.
Why third-party insurance is legally mandatory
Section 146 of the Motor Vehicles Act, 1988 prohibits using or permitting a vehicle to be used in a
public place unless there is a policy of insurance complying with Chapter XI of the Act, covering at
least third-party liability for death, bodily injury, and property damage. This requirement exists
precisely so that road accident victims have a solvent party -- the insurer -- to recover compensation
from, rather than depending entirely on the financial capacity of whoever caused the accident. Using a
vehicle without valid third-party insurance is an offence under the Act, attracting fines that have been
significantly increased by the 2019 amendments, and, separately, can expose the vehicle owner and driver
to full personal liability for any compensation awarded, since an insurer is generally not obligated to
pay out on an uninsured policy. This platform recommends NRIs who own vehicles in India -- even ones used
primarily by family members while the owner is abroad -- specifically confirm the policy is renewed on
time, since a lapsed policy at the moment of an accident can have serious financial consequences.
Third-party versus own-damage (comprehensive) cover
Third-party insurance covers compensation payable to someone other than the insured -- another road
user, pedestrian, or owner of damaged property -- and is the mandatory legal minimum. It does not cover
repair or replacement costs for the insured's own vehicle; that requires separate own-damage cover, most
commonly bundled together with third-party liability into what is marketed as a “comprehensive”
policy. A vehicle owner who carries only the mandatory third-party policy and is involved in an accident
that damages their own vehicle will generally have to bear those repair costs personally. This platform
recommends NRIs owning a vehicle in India -- particularly one used regularly by family members -- weigh
the relatively modest additional cost of comprehensive cover against the risk of bearing repair costs out
of pocket, especially where the owner is not present in India to manage a claim or repair process quickly.
Claims against uninsured or hit-and-run vehicles, and insurer defences
Where the offending vehicle is uninsured, or where an insurer seeks to avoid liability on grounds such
as the driver lacking a valid licence or the policy having lapsed, Tribunals have developed a body of case
law addressing when the insurer can still be required to pay the victim first and then recover the amount
from the owner or driver (the “pay and recover” principle), versus when the insurer's defence
fully succeeds and the victim must look to the vehicle owner directly. This is a technical, fact-specific
area, and this platform recommends both claimants and vehicle owners get case-specific legal advice rather
than assuming a particular outcome, since the practical difference between an insurer being liable and an
individual owner being personally liable can be significant, particularly where the owner has limited
assets or is based abroad.
Common mistakes people make with third-party insurance:
- Letting a policy lapse briefly, not realising this removes both the legal cover required under
Section 146 and the practical protection against personal liability.
- Assuming third-party insurance covers damage to the insured's own vehicle -- it generally does
not; that requires separate own-damage cover.
- Assuming an insurer will always pay out regardless of the circumstances -- insurers can raise
specific defences (such as an invalid driving licence) that shift liability back to the owner or
driver in some cases.
