Car insurance is not just a mandatory formality — it’s your financial shield on the road. Whether you’re buying your first car or switching insurance providers in 2025, choosing the right car insurance plan can save you thousands.
With updated rules, new products, and smarter customer tools, it’s more important than ever to understand:
Why Do You Need Car Insurance in India?
In India, car insurance is legally mandatory under the Motor Vehicles Act. If caught driving without valid insurance:
- You can be fined up to ₹4,000
- Your vehicle could be seized
- Repeated offenders can lose their license
√ But beyond legal compliance, car insurance protects you from:
- Paying for accidental damage
- Vehicle theft
- Expensive third-party claims
- Natural disaster or fire-related losses
One accident can cost you ₹50,000 or even more — a well-chosen insurance policy prevents that from coming out of your savings.
Types of Car Insurance in India (2025)
You can choose from 3 main types of car insurance:
1. Third-Party Liability Insurance (Compulsory)
Covers:
- Damages to other’s car/property
- Injuries or death of third parties
Doesn’t Cover:
- Damage to your own car
- Theft, fire, or natural disasters
⇒ Best For: Legal compliance / very old vehicles
⇒ Cheapest option — but limited protection
2. Comprehensive Car Insurance
Covers:
- Third-party liability + own car damage
- Accidents, fire, theft, floods, riots
- Includes optional add-ons
Doesn’t Cover:
- Drunk driving, unlicensed use, and wear-and-tear damages
⇒ Best For: Most car owners (especially if car is <10 years old and used regularly)
⇒ Premium is higher, but the coverage is complete
3. Own Damage (OD) Insurance
Covers:
- Damage to your vehicle only (accident, vandalism, fire, etc.)
⇒ Must be purchased alongside a third-party policy
⇒ Great for customizing coverage flexibly
Popular Add-On Covers You Can Include
Add-ons enhance your base coverage with extra protection:
Add-On | What It Does |
Zero Depreciation | Gives full claim amount (no value cut) |
Roadside Assistance | Help when your car breaks down (towing, fuel, minor repairs) |
Return to Invoice | If car is stolen or totaled, you get full invoice amount |
Engine Protection | Covers damage from water or oil leakage |
No Claim Bonus (NCB) Protector | Keep your bonus intact after 1 minor claim |
For most users: Zero Depreciation + Roadside Assistance are highly recommended.
How Are Car Insurance Premiums Calculated?
Insurance companies use these factors:
Key Premium Factors:
Car’s IDV (Insured Declared Value)
City and location (tier-1 costs more than tier-2)
Type of policy (comprehensive or third-party)
Fuel type (diesel premiums > petrol)
Vehicle age and model
Your driving history (no-claim bonuses can reduce cost!)
⇒ Use comparison tools like Policybazaar, ACKO, Bajaj Allianz to get quick online quotes from top insurers.
How to Choose the Right Car Insurance Plan
Don’t just buy what your car dealer suggests.
Ask These 5 Questions:
- What coverage do I really need? (Basic legal vs full protection)
- Is the IDV value set correctly? (Too low = poor claim; too high = high premium)
- Am I eligible for NCB?
- Which add-ons improve my peace of mind?
- What is the insurer’s claim settlement ratio?
⇒ A good insurer = >90% claim settlement ratio + digital claim process
Tips to Save Money on Car Insurance in 2025
You can save 10–40% on your car insurance premium with these smart tricks:
- Compare before renewing — switch if needed
- Use your NCB (No Claim Bonus) — up to 50% discount
- Avoid small claims so you retain NCB
- Install anti-theft devices (get IRDAI certificate)
- Renew before expiry to skip inspection/re-loading
- Buy directly online to skip agent commissions
Common Mistakes to Avoid
- Choosing cheapest policy only (can cost you more later!)
- Letting insurance lapse — restarts the whole process
- Not reading exclusions
- Forgetting to renew your PUC — which can affect claims!
Sample Example — Cost Comparison (2025 Rates)
Car Type | City | Policy | Approx Annual Premium |
Maruti Swift (2021) | Mumbai | Third-party | ₹2,240 |
Comprehensive + add-ons | ₹6,800 – ₹7,500 | ||
Tata Nexon EV | Bangalore | Comprehensive (Zero Dep) | ₹10,000 – ₹12,000 |
⇒ These are samples — real prices depend on insurer, car version, and IDV value.
Conclusion
Choosing the right car insurance in India isn’t difficult — but it does need awareness.
- First, ensure you’re legally covered
- Then upgrade to comprehensive + useful add-ons
- Compare policies before you renew, and track your NCB every year
The right insurance policy can protect your car, your wallet, and your peace of mind
Frequently Asked Questions (FAQ)
1. Which type of car insurance is best in India for 2025?
The best type of car insurance in India in 2025 is a comprehensive policy with essential add-ons such as zero depreciation, roadside assistance, return to invoice, and engine protection. It offers extensive protection for your own vehicle, third-party liabilities, theft, and natural calamities. If you’re a frequent driver or have a new car (under 5 years), comprehensive insurance is strongly recommended.
2. What is the difference between third-party and comprehensive car insurance?
Here’s a quick comparison:
Feature | Third-Party | Comprehensive |
Coverage | Damage to third party only | Own vehicle + third party |
Premium | Low | Higher |
IRDAI Mandated | Yes | No (optional but recommended) |
Add-ons Allowed | No | Yes |
Theft/Natural Calamities | Not Covered | Covered |
IRDAI mandates third-party insurance as a legal requirement, but comprehensive coverage ensures financial protection for your vehicle.
3. How is car insurance premium calculated in 2025?
Car insurance premium in 2025 is calculated based on:
- Insured Declared Value (IDV) of the vehicle
- Type of coverage: third-party or comprehensive
- City of registration (zone-based rates)
- Car’s engine type, cubic capacity, and age
- Claim history & No Claim Bonus (NCB)
- Optional add-ons selected
- Driving behavior (for telematics policies)
IRDAI has approved usage-based pricing like pay-as-you-drive, where people who drive less than 10,000 km/year can save up to 30% on premiums.
4. What is a zero depreciation cover in car insurance?
Zero depreciation, also known as nil depreciation, is an add-on that ensures full claim settlement without deducting the depreciation value of replaced parts like fiber, rubber, plastic, and metal.
Ideal for:
- Cars less than 5 years old
- High-value vehicles
- Buyers looking for maximum reimbursement
Without it, claim amounts reduce by 15–40%, depending on vehicle parts.
5. Is engine damage covered under car insurance in India?
Engine damage is not covered in standard policies unless it is caused by an accident. To safeguard against engine damage due to water ingression, oil leakage, or hydrostatic locks (e.g., during floods), you need to purchase an Engine Protection Add-On.
This add-on is especially useful during monsoons and in flood-prone cities like Mumbai, Chennai, and Bengaluru.
6. What is the claim process for car insurance in 2025?
The 2025 process is app-based and faster:
For cashless claims:
- Notify insurer via mobile app/call
- Visit a network garage
- Submit estimate + required docs
- Survey is done digitally
- Car is repaired, and insurer settles bills directly
For reimbursement:
- Repair your car
- Submit bills, photos, and claim form
- Get reimbursed in 7–21 business days
Leading insurers like Digit, Tata AIG, and Acko offer AI-based claim approvals within hours.
7. Is online car insurance safe and trustworthy in India 2025?
Yes. Purchasing motor insurance online is fully safe, provided you use IRDAI-licensed insurers or aggregators. Always verify:
- IRDAI license number
- Policy wordings and premium breakdown
- Availability of helpline/service centers
Top online providers: PolicyBazaar, Paytm Insurance, Digit, Acko, and insurer portals like ICICI Lombard, HDFC ERGO, etc.
8. Can I switch car insurance providers during renewal?
Yes. In 2025, IRDAI allows complete portability. You can:
- Change your insurer at any time during renewal
- Retain your No Claim Bonus (NCB)
- Choose better premiums or coverage
Online car insurance comparison portals can help you find real-time custom quotes from 25+ insurers.
9. Is car insurance cheaper for electric vehicles in India 2025?
Yes, EV owners benefit from discounted base third-party premiums (up to 15% lesser) as per IRDAI EV Policy. Comprehensive insurance is also lower due to:
- Fewer moving parts
- Lower accident rates
- Tax benefits on the purchase
Automakers like Tata, Mahindra, and MG often offer built-in insurance bundles for EV buyers.
10. Do car insurance policies cover natural disasters like floods or earthquakes?
Yes, comprehensive policies cover natural disasters like floods, landslides, earthquakes, storms, fire, and lightning. However:
- Engine damage due to water ingress needs an Engine Protection Add-On
- Always ensure no delay in filing claim post-incident
- Take photo evidence if towing unaided
With 2024–25 seeing a 36% rise in flood-related car claims (IRDAI Claim Report), it’s strongly advised to include relevant riders if you live in vulnerable areas
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