The Complete Guide to Car and Bike Insurance in India (2026)

Many people view motor insurance as just a legal requirement, not as a financial risk management tool. Motor insurance can protect you against high and unexpected vehicle repair expenses and, in some plans, offer full market value of your vehicle if your vehicle is stolen or damaged beyond repair.

Let’s understand in detail what motor insurance is, how it works, its types, additional riders, and how to file a motor insurance claim.

What Is Motor Insurance?

Motor insurance is a contract between the vehicle owner and the insurance provider to offer financial protection against physical damage, theft, and third-party legal liabilities arising from accidents or natural disasters.

In return for this protection, policyholders are required to pay a regular premium, which is determined based on their vehicle’s use, age, model, Insured Declared Value (IDV), and engine type.

Types of Car and Bike Insurance Policies

The following are the types of car and bike insurance policies in India.

Third-Party Insurance

Third-party motor insurance is mandatory for all vehicles in India under the Motor Vehicles Act, 1988. In this plan, vehicle damage or physical injuries to third parties are covered by the insurance provider in the event of an accident.

The policyholder will have to bear the repair costs for their own vehicle, as their insurance does not cover the damage. As a result, the premium for third-party motor insurance policies is generally lower than that of other insurance plans.

Own Damage Insurance

Own damage motor insurance covers the cost of repair of the policyholder’s vehicle. This insurance plan covers damages arising from accidents, fire, theft and natural disasters.

Standalone own damage insurance must be bought along with a third-party insurance policy if it’s not included in one policy.

Comprehensive Motor Insurance Plan

A comprehensive motor insurance plan is a combination of the own damage and third-party liability plans. This plan not only covers damages to third parties but also the cost of repair for the policyholder’s vehicle.

A comprehensive motor insurance plan is more expensive than own damage or third-party insurance because it offers extensive protection and allows policyholders to customise their coverage through riders.

What Does Motor Insurance Cover?

The following types of damage are covered under a standard motor insurance policy:

Benefits of Car and Two-Wheeler Insurance

The following are the benefits of having car and two-wheeler insurance.

Financial Protection

A motor insurance policy provides financial protection against high and unexpected repair costs arising from accidents, theft, vandalism, natural disasters, and fire. This ensures you do not have to pay out of pocket for the expenses, preserving your savings.

Compensation for Third-Party Liabilities

If the policyholder is responsible for an accident that has damaged a third-party vehicle or resulted in physical injury, the insurance provider will compensate for the vehicle damages incurred by both the third party and the policyholder.

Protection Against Theft

If you have your own damage or comprehensive motor insurance policy and your vehicle is stolen, the insurance provider will pay the predetermined IDV amount. The IDV is determined by the insurer using a standard formula that takes into account the vehicle's depreciation.

IDV = Manufacturer's Listed Selling Price − Depreciation + Accessories (if insured separately)

Natural Disaster

If your vehicle is damaged due to natural disasters such as floods, earthquakes, and other natural calamities, the insurer will cover the cost of repairing the damage, subject to the policy terms and conditions.

Access to Cashless Repair Garages

Most motor insurance providers offer a cashless claim facility through a vast network of partner garages. The insurer settles the covered repair bills directly with the workshop, eliminating tedious reimbursement procedures for the policyholder.

Important Add-Ons You Should Consider When Buying Motor Insurance

Individuals planning to buy motor insurance must consider the following add-ons for customising their coverage.

Zero Depreciation Cover

Zero depreciation cover, also known as bumper-to-bumper insurance, ensures your insurer covers the full repair costs without deducting the depreciation on the damaged parts. This add-on is a must-have for policyholders with new or luxury cars.

A zero depreciation add-on is generally available for vehicles that are up to 5 years old, although some insurers may offer it for older vehicles.

No Claim Bonus (NCB)

A No Claim Bonus (NCB) is a benefit under comprehensive motor insurance where the policyholder is rewarded for not making any claims during the policy year. As a reward, the insurer offers a discount on the renewal premium, l helping reduce the cost of renewing the policy.

Compulsory Personal Accident Cover

If you meet with an accident resulting in injury or death to yourself or a co-passenger, a compulsory personal accident cover provides financial assistance.

Roadside Assistance Cover

If your vehicle breaks down or meets an accident and is stranded on the road, the 24x7 roadside assistance cover will offer services such as towing, fuel delivery, minor repairs, and changing flat tyres, etc.

This add-on is suitable for policyholders who travel long distances or to remote areas.

Consumables Cover

A standard motor insurance policy does not cover the cost of consumable items such as screws, nuts, bolts, and fluids, etc. A consumables cover ensures the insurer pays for the replacement cost of consumable items.

Engine Protection Cover

An engine protection cover provides coverage for your vehicle’s engine damage due to oil leakage or water. This add-on does not cover engine damage caused by accident or normal wear and tear.

Key Replacement Cover

Under this add-on, the insurer pays for the cost of replacing your vehicle’s stolen/ lost or damaged key or locks.

Return to Invoice

If your vehicle is stolen or damaged beyond repair, the Return to Invoice add-on will ensure the insurer pays the value of the vehicle, including the ex-showroom price, road tax, and registration charges. This add-on may significantly increase your premium costs, but offers strong financial protection.

How Is Your Motor Insurance Premium Calculated?

Here’s how the premium on your motor insurance is calculated.

Vehicle Age and Model

New and luxury vehicles are more expensive to repair and, therefore, attract higher insurance premiums than older and mass-manufactured vehicles, which generally have lower repair costs.

Cubic Capacity

The higher the Cubic Capacity (CC) of your engine, the more power it generates. Vehicles with larger engines are charged higher premiums compared to those with smaller engines.

IDV

IDV is the maximum amount the insurer will pay if your vehicle is stolen or damaged beyond repair due to an accident. The higher the IDV amount, the higher the premium will be, as the insurer will have to bear the risk of high claim payout in the event of theft or serious vehicle damage.

Registration City

Vehicles registered in urban and metro cities with high accident rates are charged higher premiums than those registered in rural cities and those with low accident rates.

Fuel Type

Cars are charged different premium rates based on the fuel type. For instance, diesel vehicles and electric vehicles carry higher premiums due to their higher purchase costs and IDVs, while petrol cars attract lower premiums.

NCB

Policyholders who did not raise any claim in a policy year are given a discount on the premium on policy renewal. This reduces the premium payable on motor insurance.

Add-ons

Policyholders can customise their coverage by opting for add-ons. These add-ons carry extra charges which increase the motor insurance premium.

How to Buy Car or Bike Insurance Online

Here’s a step-by-step guide on how to buy car or bike insurance online.

Select Motor Insurance Provider

Shortlist and compare motor insurance plans offered by various insurance providers and choose one that aligns with your coverage and financial requirements. You can buy motor insurance directly from the insurer’s website or through a web aggregator like Upstox.

Select Coverage

Based on your requirement, select a type of coverage. If you wish to buy motor insurance just for the sake of legal compliance, opt for third-party insurance, and if you seek both your own damage and third-party liability coverage, go for a comprehensive insurance plan.

Enter Vehicle Details and Select add-ons.

Enter vehicle details such as registration number and contact information. If you want to customise your coverage, you can opt for add-ons such as engine protection, NCB, zero depreciation, roadside assistance, and other riders based on your requirement.

Review IDV

If you’ve selected your own damage or comprehensive motor insurance, review the IDV and ensure it matches your vehicle’s current market value.

Pay and Download policy

Complete the KYC details and pay your motor insurance premium via UPI ID or net banking. You will receive the official policy document to your registered email ID. Take a printout of the policy and keep it in your vehicle.

How to File a Motor Insurance Claim

There are two claim methods in motor insurance.

Cashless Claim

Under the cashless claim process, the policyholder files a claim with the insurer and gets the vehicle repaired at one of the network garages partnered with their insurance provider. The insurer’s appointed surveyor will inspect the vehicle and approve the repair work, and the vehicle will be repaired.

The policyholder does not have to pay the repair expenses upfront; instead, the insurer directly coordinates with the garage and settles the covered expenses, subject to the policy terms and conditions.

Reimbursement Claim

In the reimbursement claim process, the policyholder must inform the insurer about the vehicle damage via the designated website, app, or customer care. The policyholder will get their claim number via SMS, and a surveyor will be assigned.

The surveyor will inspect the vehicle, review the estimated repair costs, and send their observations to the insurer, who will then approve or reject the claim.

Common Reasons Why Motor Insurance Claims Get Rejected

The following are certain common reasons why motor insurance claims are rejected.

No Valid Driving License

If you get into an accident while driving without a valid license, your motor insurance claim will not be covered, and you will be liable to pay for the repair costs.

Drunk driving

If a policyholder damages their own vehicle or third-party properties while driving under the influence of alcohol and drugs, they will be liable to pay for the damages out of pocket.

Lapsed Policy

If your vehicle is damaged while your motor insurance policy is expired, your insurance claims will be rejected, and you will have to cover the repair expenses yourself.

Late Notification

When your vehicle is damaged, you have to inform your motor insurance provider within the stipulated timeframe. Failing to report the incident within the specific period can lead to claim rejection.

Geographical Limits

If you meet an accident outside the zones or countries covered under your motor insurance policy, your claim may get rejected.

Commercial Use

If you use a personal vehicle for business purposes, such as delivery or taxi driving, and damage it, your standard personal insurance claim will likely be denied.

Undeclared Modifications

If you install any accessories or make modifications to your vehicle after purchase, you must inform your insurance provider. Failing to disclose these changes may result in your claim being rejected.

Wear and Tear

Policyholders cannot file claims for standard depreciation and normal wear and tear of the vehicle. If you file a claim for these damages, it may get rejected.

Self-repairs

If you get your vehicle repaired without informing the insurer or waiting for the surveyor to inspect your vehicle and approve the repair work, your claim will get rejected.

FAQs

Why is motor insurance mandatory in India?

Third-party car insurance is mandatory for every vehicle under the Motor Vehicle Act 1988 to ensure third parties are financially protected in the event of an accident.

What is third-party insurance?

Third-party insurance covers damage or injury caused to another person, their vehicle, or property. This type of insurance does not cover damages to your own vehicle.

What is comprehensive insurance?

Comprehensive insurance covers both third-party liabilities and damage to your own vehicle. The insurer compensates for the vehicle damages due to accidents, theft, fire, floods, and other natural disasters.

Can I transfer my NCB to a new vehicle or insurer?

Yes, you can transfer your accrued NCB benefit to a new vehicle or a new insurer when you renew your policy.

Does motor insurance cover engine damage caused by floods?

Yes, comprehensive insurance with engine protection coverage covers damage caused by floods. If you have third-party insurance, then your insurer will not cover engine damage.

Does motor insurance cover theft?

Yes, comprehensive and own damage insurance covers vehicle theft, subject to the policy terms and conditions. If your vehicle is stolen, the insurer will pay the IDV, which is the maximum amount your insurer will pay if your vehicle is stolen or damaged beyond repair.