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New car insurance: a first-time buyer's complete checklist
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Introduction
Buying a new car involves more decisions than most first-time buyers expect. Insurance is one of them, and it is one that gets made quickly, often at the dealership, often without enough time to read what you are actually signing. The mandatory bundling rules for new cars, the difference between what is compulsory and what is optional, the IDV, the optional covers, all of it is presented across several documents in the final hour before you drive the car home.
This blog is a checklist for first-time buyers. It covers what you are legally required to have, what the mandatory bundle means in practice, what optional covers are worth considering for a new car, what to check before the dealer finalises the policy, and what happens when the first renewal arrives.
Keep in mind
Third-Party insurance is mandatory: Every car on Indian roads must have valid Third-Party cover. A first offence can attract a ₹2,000 fine for a first offence
New cars get 3-year Third-Party cover: This mandatory cover cannot be opted out of at purchase
Check the IDV: It determines the maximum payout for theft or total loss, based on the policy terms
Check your Personal Accident cover: The compulsory owner-driver PA cover is ₹15 lakhs
You get more choice at renewal: When your Own Damage cover expires, usually after one year, you can compare insurers and plans
Your new car insurance checklist
Before you drive your new car out of the showroom, make sure you have:
Third-Party cover
Confirm the mandatory 3-year cover is in place.
Own Damage cover
Check that your 1-year OD cover is included if you are buying comprehensive insurance.
Correct IDV
Check that the IDV matches your car's variant and listed price.
Required PA cover
Confirm the ₹15 lakh owner-driver Personal Accident cover is included.
Optional covers
Check which add-ons are included and whether you actually need them.
Policy documents
Make sure you receive the relevant Third-Party and Own Damage policy documents.
Premium breakdown
Check the Third-Party premium, Own Damage premium, add-ons and GST before paying.
First renewal date
Note when your Own Damage cover expires so you can compare options before renewing.
1. What you are legally required to have from day one
Before a new car can be registered and driven on Indian roads, 2 types of insurance cover are compulsory under Section 146 of the Motor Vehicles Act.
Third-Party cover: This covers your legal liability for injury, death, or property damage caused to another person. Under Section 147 of the Motor Vehicles Act, Third-Party liability for injury or death is unlimited, there is no ceiling on what a Motor Accident Claims Tribunal (MACT) can award. Third-party property damage is covered up to ₹1 lakh per incident under a standard embedded Third-Party plan.
Compulsory Personal Accident cover: The compulsory Personal Accident (PA) cover of ₹15 lakhs for the owner-driver protects against death or permanent disability arising from a car accident. This is separate from the Third-Party cover and must be present on the policy. Check the policy document before leaving the showroom to confirm it is included.
Driving without valid Third-Party insurance is a punishable offence under Section 196 of the Motor Vehicles Act. The penalties are:
- First offence: ₹2,000
- Second and every subsequent offence: ₹4,000
The law does not increase the fine for a third or later offence. It remains ₹4,000 for every offence after the first.
2. What the mandatory bundling means for a new car
When you buy a new private car, the insurance is structured differently from a renewal policy. You get 3 years of Third-Party cover and 1 year of Own Damage cover at purchase.
In practice, this means:
- Your 3-year Third-Party cover stays with the original insurer during the bundled period.
- Your Own Damage cover comes up for renewal after the first year.
- From the first OD renewal, you can compare insurers and buy standalone OD cover from a different insurer if you prefer.
- Even though the two covers are bought together, you should receive separate policy documents for Third-Party and Own Damage cover.
The dealer usually arranges this insurance along with the car purchase, but you should check exactly what is included before signing the paperwork.
3. The difference between Third-Party and comprehensive cover
For a new car, you need Third-Party insurance at a minimum because it is the legal requirement, but you can choose to add Own Damage cover through a comprehensive policy. The main difference is simple: Third-Party insurance protects you against damage or injury caused to others, while comprehensive insurance also protects your own car.
For a new car, comprehensive cover can be useful because the car has a high value and repair costs can be significant. Without Own Damage cover, you would have to pay for damage to your own car yourself.
5. Optional covers worth considering for a new car
A new car is the best time to consider optional covers, the IDV is high, repair costs on newer models are higher, and the financial risk of a major loss is greatest in the first few years. These are the optional covers most relevant to a new car.
Zero Depreciation
In a standard claim, the insurer deducts depreciation on parts before paying out. A Zero Depreciation optional cover removes that deduction, the full replacement cost of covered parts is paid. For a new car where parts are at their highest value, this makes the most financial sense. Most insurers offer Zero Depreciation for cars up to 5 years old.
Return to Invoice
If the car is stolen or damaged beyond repair, the standard payout is the IDV, the current market value, which is already slightly below the on-road price from the first day of ownership due to depreciation. A Return to Invoice optional cover pays the original on-road price, including registration and road tax, rather than the depreciated IDV. For a brand-new car, the gap between IDV and invoice price is at its widest.
Engine Protect
Damage to the engine from water ingress, riding through a flooded road, for example, is excluded from a standard Own Damage policy. An Engine Protect optional cover specifically covers this type of damage. Given that newer cars often have lower-slung engines and tighter clearances, this cover is particularly relevant in flood-prone cities.
NCB Protect
A No Claim Bonus (NCB) starts building from the first claim-free year. A single claim in the early years resets it without NCB Protect. For a first-time buyer who wants to build the NCB discount while still being able to raise a claim without losing it entirely, NCB Protect is worth considering.
Passenger Cover: The compulsory ₹15 lakh PA cover applies only to the owner-driver. A Passenger Cover optional cover extends Personal Accident protection to named or unnamed passengers in the car.
The following optional covers are not relevant to every buyer but may be relevant depending on usage: Key Secure (for key loss or lockout), Tyre Secure (for standalone tyre damage), and Consumables Cover (for engine oil, coolant, and similar items used during a repair).
6. What to check before you sign your policy
Before the dealer finalises your insurance, go through these details one by one:
IDV accuracy
Even for a new car, check that the IDV on the policy reflects the manufacturer's listed price for your specific variant, not a lower figure that reduces premium but also reduces the maximum payout. Confirm the variant, the ex-showroom price, and the depreciation applied.
Plan type confirmation
Confirm whether the policy is Third-Party only or comprehensive. The dealer will typically offer a comprehensive plan, but verify this explicitly, some dealers default to minimum cover on entry-level variants.
Optional covers listed
Ask for a written list of optional covers included in the plan. Verbal confirmations at a showroom are not binding, what is listed on the policy document is what you hold.
Both policy documents
Confirm you receive 2 separate documents, the Third-Party policy for 3 years and the Own Damage policy for 1 year. Both should show the same car details, registration number (or chassis number before registration), and your name.
Compulsory PA cover: Confirm the ₹15 lakh PA cover is listed on one of the policies. It should appear as a named section or endorsement on either the Third-Party or the comprehensive policy document.
FASTag: A FASTag is mandatory for all new cars in India under Ministry of Road Transport and Highways notification. Dealerships typically arrange this alongside registration. Confirm it is activated before you drive away, it is linked to the car's registration and required for toll payment on national highways.
Premium breakdown: Ask for an itemised premium breakdown, Third-Party premium, Own Damage premium, optional cover premiums, and GST at 18% shown separately. This tells you exactly what you are paying for and makes renewal comparison easier.
7. Documents you need at the time of purchase
Keep these documents accessible from the day the car is delivered.
Registration Certificate (RC)
Issued after registration, carries the car's registration number, which is the primary identifier on all future policies
Insurance policy documents
Both the 3-year Third-Party document and the 1-year Own Damage document, store digital copies in the Kiwi app or another accessible location
Driving licence
Valid for the category of vehicle being driven, check the validity date and the vehicle class listed
FASTag
Activated and linked to a payment method before the first highway drive
Pollution Under Control (PUC) certificate
Required for all vehicles in India, new cars typically come with a PUC certificate valid for 1 year from the date of sale
Road tax receipt
Proof that road tax was paid at the time of registration
For claims, you will additionally need photographs of any damage taken at the scene and a First Information Report (FIR) if a third party is involved or the car is stolen. Having the policy document number accessible on your phone saves time when raising a claim.
8. What happens at the first renewal
The first Own Damage renewal, 1 year after purchase, is when the full insurance decision becomes yours for the first time.
At this point, the 3-year Third-Party bundle is still running and cannot be moved. But the Own Damage component is completely up for review:
- You can renew OD with the same insurer the dealer placed the original policy with
- You can move the OD component to a different insurer as a standalone Own Damage policy, permitted since 1 September 2019
- You can compare IDVs, optional covers, and OD premiums across insurers before renewing
The No Claim Bonus also becomes relevant here. If the first policy year passed without a claim, a discount applies to the Own Damage premium at this renewal, and the NCB grows with each subsequent claim-free year. Protecting this discount from year 1 is where long-term premium savings begin.
At renewal, review the IDV the insurer has set for year 2. It should be lower than the original IDV, the depreciation schedule steps down from 5% in year 1 to 15% in the first full year. Confirm this reflects the car's actual current market value before signing.
What Kiwi Insurance does differently
Buying new car insurance through the dealer is fast, but it limits your choice to the insurer the dealer works with. Kiwi Insurance gives you a different starting point.
- Buying through Kiwi Insurance means the IDV, the plan type, and the optional covers are all choices you make before you pay, not a configuration presented to you at a desk with a pen.
- Only with Kiwi, Super NCB builds to 90%, significantly higher than the 50% ceiling on a standard No Claim Bonus, so the discount that starts building from your first claim-free year grows further than it would on a standard plan. If you raise a claim, Super NCB steps down by one level rather than resetting to zero.
- Once you register a claim, a dedicated Claims Specialist is assigned to you, one personal contact who explains the process in plain language from registration through to completion. The Claims Specialist is assigned after you register a claim, not at the point of buying the policy.
Conclusion
New car insurance involves more than one decision, what is compulsory, what the mandatory bundle means, which optional covers suit a new car, what to check before the dealer finalises the paperwork, and what happens at the first renewal when the full choice opens up. Getting the IDV right from day one, confirming the compulsory PA cover is in place, and understanding what the policy does and does not cover are the 3 things that matter most before you drive away.
With Kiwi Insurance, the process of buying or renewing starts with your choices, and a dedicated Claims Specialist is there once you register a claim to walk you through every step.
Written by
Reuben Solomon
Lead Content Writer
Reviewed by
Rupinderjit Singh
Head - Tech Product & Digital Business
Frequently asked questions
Every new car in India needs a minimum of Third-Party insurance under Section 146 of the Motor Vehicles Act from the day of purchase. For new cars bought after 1 September 2018, a mandatory 3-year Third-Party bundle and 1-year Own Damage cover apply. The compulsory Personal Accident cover of ₹15 lakhs for the owner-driver must also be confirmed on the policy before the car is driven on the road.