What is car insurance and why every Indian car owner needs it

Introduction

Car insurance helps cover the costs when your car is damaged or stolen and can protect you from legal and financial liability if you injure someone or damage their property. In India, Third-Party car insurance is mandatory by law, but you can choose additional cover depending on how much protection you need. For a small, fixed premium each year, it stands in for a repair bill, a replacement cost, or a legal claim that could otherwise run into lakhs.

Third-Party cover is built entirely around the other person, rather than your own car:

• If your car injures someone, damages their bike, or dents their gate, this is what pays for it
• If the matter ever needs to be settled formally, it is resolved through a Motor Accident Claims Tribunal rather than left for the two parties to negotiate directly
• Your own car, and your own injuries, are not covered under this policy

Without Third-Party cover, a person affected by an accident may have to recover their losses directly from the driver responsible, who could also be left paying compensation or other costs out of pocket. The compulsory insurance requirement exists to make sure third-party losses from road accidents always have financial protection behind them.

Comprehensive car insurance fills that gap. It bundles the mandatory Third-Party liability with Own Damage (OD) cover, which pays for repairs after an accident and for losses from theft, fire, or events such as flooding.

This is exactly why most Indian car owners choose Comprehensive. The Third-Party half keeps you legal, and the Own Damage half protects the car you actually paid for. There is a third route too: standalone Own Damage cover, allowed since September 2019, useful if your Third-Party policy is already valid and only the damage side needs renewing.

Kiwi's car insurance covers every part of this decision in one place, from buying and comparing these three types, to raising a claim, to understanding pricing and optional covers, once you are ready to look at your own car specifically.

A first offence can mean imprisonment of up to three months, a fine of ₹2,000, or both. Every time after that, whether it's your second, third, or any later offence, the same imprisonment term applies, but the fine rises to ₹4,000, and traffic authorities are within their rights to detain the vehicle until you produce valid cover.

The financial risk goes beyond the fine. Without a policy, you carry the full cost of any injury or damage you cause, out of your own pocket.

Driving out of a showroom with a new car

You do not need to shop around for insurance the moment you drive a new car out of the showroom. Since September 2018, every new car sold in India comes bundled with 3-year Third-Party cover and 1-year Own Damage cover, a 1+3 structure that is a condition of registration.

That structure keeps your legal cover, the Third-Party portion, from quietly lapsing in year two or three. The Own Damage portion still renews every year, so once your first year is up, you can stick with the same insurer or switch, while the original 3-year Third-Party cover keeps running in the background.

Taking ownership of a used car

A used car does not arrive insurance-free either, though the process looks different. Most sellers and dealers ensure you drive out with valid cover in place, but the existing policy still needs to be formally transferred into your name, since a car insurance policy belongs to whoever is named on it, not automatically to whoever is driving.

Under Section 157 of the Motor Vehicles Act, this transfer must happen within 14 days of taking ownership. For that window, the Third-Party portion of the previous owner's policy extends to you automatically, but the Own Damage portion only becomes valid once your insurer has formally endorsed the transfer in your name. The seller's No Claim Bonus does not move to you either, since it stays with the seller for use on their next car, so a transferred policy typically starts your own NCB from zero.

Kiwi's take: never buy a used car without a valid insurance policy already in place, or already being transferred into your name. Used car dealers usually build a fresh or transferred policy into the price you pay, so it is worth confirming exactly what you are getting before you agree to the deal.

• Third-Party cover alone keeps you legal but protects nobody's car, including your own.
• Comprehensive cover protects both sides of that equation, which is why most owners choose it.
• Own Damage cover works better if your Third-Party cover is already valid and only the damage side needs renewing.

Matching the cover to your actual situation counts for more than chasing the cheapest quote you can find.

A clean claim history usually earns you a No Claim Bonus (NCB), which brings your Own Damage premium down at renewal. Goods and Services Tax (GST) at 18% gets added to every premium quoted, so build that into your comparison before you decide.

Kiwi also goes further than what most insurers offer, with optional covers built for situations the wider market often leaves out. Only with Kiwi do several of these come as part of the same straightforward buying process as the rest of your policy, rather than a separate negotiation once you already hold the base cover.

• A dedicated Claims Specialist stays with your claim from the day you raise it to the day it is settled, at no extra cost, so you have one point of contact instead of repeating the same details to a different person every time you call
• You can track your claim status at any point, instead of waiting on hold for an update
• Depending on your car and policy, you also build Kiwi's Super NCB for free, which grows to a higher maximum than a standard No Claim Bonus (NCB)
• Only with Kiwi, Super NCB steps down by just one level after a claim instead of resetting, so you keep saving more each year, even after a claim

Once you have worked out which structure fits, you can compare Kiwi's car insurance plans and buy your policy online.