Upcoming Changes in Motor Third-Party Liability Insurance Rates for 2025: How Much More Will Policies Cost?

What is third party car insurance and why is it important?

Third party car insurance is a mandatory insurance policy in India that covers damages caused to a third party, including property damage or injuries, during an accident. Unlike comprehensive car insurance, it does not provide coverage for damages to the insured’s vehicle or injuries to the insured.

This insurance is crucial as it ensures financial responsibility and legal compliance for vehicle owners. Whether you own a private car, motorcycle, or commercial vehicle, having third party car insurance is not just a legal requirement but also a vital safety net.

Key changes in third-party insurance for 2025

The upcoming changes to third-party motor insurance are designed to enhance coverage, improve claims processing, and align with global standards. Here are the major updates expected:

• Increased liability limits: Insurance companies will be required to offer higher compensation limits for property damage and medical expenses. This adjustment reflects the increasing costs associated with vehicle repairs and healthcare, ensuring more comprehensive financial protection for third parties.

• Elimination of deductibles: One of the notable changes is the removal of deductibles from third-party insurance policies. This means policyholders will not have to bear a portion of the claim amount out of pocket, shifting the entire financial responsibility to the insurer.

• Direct claims process: A mandatory direct claims system will be implemented, allowing insured individuals to file claims directly with their insurance provider instead of dealing with the insurer of the at-fault party. This change will simplify and expedite the claims process.

• No depreciation on claims: Claims will be settled without considering depreciation, ensuring that repairs restore vehicles to their pre-accident condition. Insurance companies will collaborate with authorised service centres, providing high-quality repairs and saving vehicle owners the hassle of finding reliable services.

Impact on third-party insurance rates

While the enhancements in coverage and services are welcome, they are expected to result in a moderate increase in third-party insurance premiums. Experts predict an average rise of 15–20% in policy rates for 2025. For instance:

• Small cars: Premiums may increase from Rs 2,500 in 2024 to approximately Rs 3,000.

• Motorcycles: Premiums for two-wheelers may rise from Rs 1,200 to Rs 1,500.

• Commercial vehicles: Trucks and buses may see premium hikes ranging from Rs 5,000 to Rs 6,000, depending on their capacity and usage.

Although these increases may seem significant, the improved benefits and convenience of the updated policies offer better value for money.

Advantages of the new third-party insurance framework

The updated third-party insurance policies aim to provide a host of benefits, including:

1. Enhanced financial protection: With higher liability limits, policyholders will be better equipped to handle large claims, reducing the risk of out-of-pocket expenses.

2. Streamlined claims process: The direct claims system eliminates delays caused by third-party involvement, ensuring faster and smoother settlements.

3. Quality vehicle repairs: Collaboration with authorised service centres ensures that damaged vehicles are restored to their original condition without any compromise on quality.

4. Improved transparency: The removal of deductibles and depreciation ensures that claims are settled fairly, building trust between insurers and policyholders.

Preparing for the transition: What you should do

To mitigate the impact of rising premiums, vehicle owners are advised to renew their existing policies before the end of 2024. Renewing your third party car insurance at current rates will help you lock in lower premiums while continuing to enjoy uninterrupted coverage.

Additionally, consider upgrading to comprehensive car insurance for more extensive protection. Comprehensive policies cover both third-party liabilities and damages to your own vehicle, offering peace of mind in unforeseen circumstances.

Understanding the significance of compliance

While third-party insurance is a legal requirement, its importance extends beyond regulatory compliance. It plays a critical role in maintaining road safety and ensuring accountability in the event of accidents. Adopting the updated policies demonstrates a commitment to responsible vehicle ownership and helps create a safer driving environment for everyone.

Conclusion

The changes in motor third-party liability insurance for 2025 are a step towards improving financial security and streamlining insurance services. While premiums are expected to increase, the enhanced benefits, including higher liability limits, streamlined claims processes, and better vehicle repairs, make these policies a worthwhile investment.

As a vehicle owner, staying informed about these updates and renewing your policy on time is crucial to avoiding unnecessary costs. Whether you need to renew your existing policy or explore new options, the availability of affordable and reliable car insurance and third-party car insurance policies ensures that you can continue driving with confidence and peace of mind.

# This is a guest article authored by Bajaj Finserv. For any enquiries or details, you can visit the author's website.