Third Party Motor Insurance Premium May Rise by 25% in FY26
Third party motor insurance premium for Indian vehicles is set to increase by 18% to 25% in FY 2025–26, based on a proposal under consideration by the Ministry of Road Transport and Highways (MoRTH). This follows recommendations from IRDAI—India’s insurance regulator—to revise rates in line with increasing motor claim costs and accident statistics.
This change could impact vehicle owners, businesses with fleet operations, and insurance providers.
Why Is This Premium Hike Proposed?
According to IRDAI’s internal report, the cost of third-party insurance claims has consistently risen due to:
- Increased accident-related compensation ordered by courts
- Higher hospitalisation and legal settlement costs
- Rising repair and replacement costs for vehicles
- Greater vehicle density on roads across Indian cities
As a result, premiums may be revised to maintain the solvency and risk balance of general insurance companies.
What Is Third-Party Motor Insurance?
Third-party motor insurance is mandatory under the Motor Vehicles Act, 1988. It covers:
- Injury or death to third persons (pedestrians, passengers, etc.)
- Damage to third-party property
- Legal liabilities arising from road accidents
Note: It does NOT cover damages to your own vehicle.
Proposed Premium Changes (Expected FY26 Slabs)
| Vehicle Type | Current Premium (FY25) | Proposed Premium (FY26) | % Hike |
|---|---|---|---|
| Two-Wheelers (Up to 75cc) | ₹538 | ₹635 | +18% |
| Private Car (Up to 1000cc) | ₹2094 | ₹2617 | +25% |
| Goods Vehicles (3.5T–7.5T) | ₹16,049 | ₹18,920 | +18% |
| Commercial Taxi (<=4 seat) | ₹6932 | ₹8575 | +23% |
Indicative rates based on IRDAI recommendations. Official notification awaited from MoRTH.
Legal Reference & Government Authority
- Motor Vehicles Act, 1988 – Section 146 mandates third-party coverage for all vehicles on Indian roads.
- IRDAI – Regulates pricing framework and loss ratio data for insurers.
- MoRTH – Notifies official premium rates annually.
Last official notification for premiums: MoRTH Notification No. GSR 354(E) dated 28.03.2024
Expert View: What Should Vehicle Owners Do?
“If you’re due for vehicle renewal between April and July 2025, renew early to lock in lower premiums,” says Rajesh Varma, a Chennai-based auto insurance advisor.
- Fleet owners should re-calculate operating costs
- Taxi operators can restructure fare margins
- Individual buyers of new vehicles in FY26 must factor in higher upfront cost
Practical Tips for Policyholders
- Check renewal dates and consider long-term policies to hedge against yearly hikes
- Use IRDAI-approved web aggregators for premium comparison
- Don’t confuse own damage vs third-party—both are priced separately
Final Thoughts
The upcoming hike in third party motor insurance premium is not just a pricing move—it’s a regulatory response to risk realities. Whether you’re a car owner, bike commuter, or fleet operator, staying ahead of compliance and cost trends can make a real difference.
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Summary
Third-party motor insurance premiums may increase by up to 25% in FY26 as per IRDAI’s recommendation. MoRTH is reviewing the proposal. Vehicle owners should consider early renewal and long-term policies to avoid higher costs.
FAQs
Q1. When will the premium hike become official?
Once MoRTH notifies the revised rates—likely before Q2 FY26.
Q2. Does this impact all types of vehicles?
Yes, including private cars, two-wheelers, taxis, and goods vehicles.
Q3. Can I still get the old rates?
Only if you renew your policy before the effective date of the new rates.