Commercial Vehicle Insurance in India: What Makes It Different & Why It Matters

5 min read | Updated on July 25, 2025, 15:36 IST

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Garima is a single mother living in Indore. She runs a small cab business, employing three drivers and operating a fleet of four cars. With an increase in demand during the tourist season, she decided to purchase a second-hand compact sedan from a friend, expanding the fleet size to 5, and hired one additional driver. She also used to drive for shorter distances, thereby making up for the fifth driver.

While returning from Ujjain with a family, she was stopped near the city entrance by the traffic police. She showed them the driving license, registration papers, and seller’s private insurance. The traffic police reprimanded her, stating that a private insurance policy transferred to her name by the previous seller is insufficient, as her vehicle is used for commercial purposes. Garima understood that she had made a major mistake and decided to check the status of all other cars in her fleet and take corrective actions.

The requirements and operating conditions for commercial vehicles differ significantly from those of a private vehicle. Commercial vehicles may carry passengers, luggage, and goods, and can have long working shifts, making them extremely prone to accidents and damage. Hence, a policy like private car insurance would be insufficient for such vehicles.

Commercial vehicles, including trucks, cabs, delivery vans, and school buses, play a crucial role in powering businesses, logistics, and livelihoods. There are various risks associated with such vehicles, such as accidents, theft, damage, and third-party liabilities. Besides being a legal necessity, commercial vehicle insurance is critical for a business’s continuous operations. These insurance policies are designed to protect specific business needs and comply with relevant legal mandates. Let us find out more about commercial vehicle insurance in India.

What is Commercial Vehicle Insurance?

It is a specialized motor vehicle insurance policy designed for vehicles used in business operations. It encompasses all vehicles used for transporting passengers, goods, or providing services. Irrespective of the size of your business or the number of vehicles, if the motor vehicle is used for commercial purposes, you need to obtain commercial vehicle insurance.

The policies typically come in two forms:

Third-party liability

Legally mandatory, covering damages or injuries caused to others.

Comprehensive

Covers both third-party and own-vehicle damages.

The premium varies significantly depending on the type of commercial activity conducted, the size of the vehicle, and the associated risks. Insurers consider commercial vehicle insurance riskier due to the higher chances of accidents, natural disasters, theft, and third-party liabilities.

How Is Commercial Vehicle Insurance Different from Private Car Insurance?

As mentioned in the previous section, the categories of commercial vehicle insurance are the same as those in private insurance: third-party and comprehensive. The coverages are also similar. In that condition, one must wonder what the differences are between the two. Let us find out:

Commercial vs Private Vehicle Insurance

Basis	Commercial Vehicles	Private Vehicles
Usage	Business purposes: transport, delivery, taxi, rentals	Personal commute, leisure, non-commercial use
Risk and Premium	High risk and hence higher premium	Moderate to low risk, thereby resulting in a similar premium
Documentation	Requires permits, fitness certificate, and commercial license	Standard vehicle registration and owner ID
Add-ons	Transit cover, legal liability to paid driver, fleet RSA	Zero dep, engine protect, NCB protect
Regulation	Stricter IRDAI & RTO compliance for business use	Basic Motor Vehicles Act requirements
Inspection Frequency	Quite frequent, especially during interstate transportation	Less frequently, generally when the driver violates traffic rules or in special circumstances

Who Needs Commercial Vehicle Insurance?

If you fall into any of the following categories, obtaining commercial vehicle insurance is mandatory for you:

Fleet operators and logistics companies transporting goods across cities and states
Taxi and cab aggregators like Ola, Uber, or private tour operators
Delivery services (e-commerce, food, courier, etc.)
School and staff transport providers
Small business owners using vans, autos, or pickups for goods or client movement
Construction firms operate on-site vehicles like dumpers and cranes.

What Does Commercial Vehicle Insurance Cover, and What Add-Ons Should You Consider?

Let us first take account of the core coverages. First, third-party liability insurance is mandatory under the Motor Vehicle Act, and it covers damages or injuries caused to others. If you go for comprehensive insurance, you will receive additional protection for your vehicle from accidents, natural disasters, theft, and vandalism. Additionally, personal accident coverage is mandatory for both categories of insurance policies.

The add-ons here are a bit different from the private vehicle insurance, and the most popular ones are as follows:

Engine and Gearbox Protection

Crucial for heavy-duty or frequently used vehicles.

Transit Risk Coverage

Covers damage while goods are in transit.

Theft and Fire Protection

Especially useful for transporting high-value cargo.

Roadside Assistance (RSA) for Fleets:

Helps reduce downtime during breakdowns.

What are the Penalties for Non-Compliance?

Just like private vehicles, any commercial vehicle is not allowed to drive legally on the Indian roads without a valid insurance. Here are the penalties:

First Offence

A fine of ₹2,000 and/or imprisonment for up to 3 months.

Repeat Offence

A fine of ₹4,000 and/or imprisonment for up to 3 months.

FAQs

Is commercial vehicle insurance mandatory in India?

Yes, third-party commercial vehicle insurance is legally required under the Motor Vehicles Act.

What happens if I don’t have insurance for my commercial vehicle?

You may face fines up to ₹4,000, vehicle seizure, and up to 3 months in jail.

Can I use my private insurance for commercial vehicle purposes?

No, using private insurance for commercial use is illegal and voids the coverage.

What vehicles fall under commercial insurance?

Goods carriers, taxis, buses, autos, delivery vans, and any vehicle used for business.

Summing up

If your business uses any kind of vehicle directly or indirectly in its operations, you must take care of the commercial vehicle insurance. It is not just a compliance requirement but a vital business safeguard that you should not miss. You can always visit the Upstox website or app and compare quotes from the top commercial vehicle insurance companies in India.

About Author

Upstox Desk

Team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.