Types of Motor Policies (TP, Comprehensive, OD, Add-ons)
The three forms of motor cover in India — compulsory third-party liability, standalone own damage and the package policy combining them — plus the owner-driver personal accident cover, the compulsory deductible, third-party limits and what add-ons change.
Two risks, two sections
A vehicle creates two separate risks: the harm it may do to other people (death, injury or damage to their property), for which the owner can be held legally liable, and loss of or damage to the vehicle itself.
In the package policy, Section I is own damage and Section II is liability to third parties. The death of a pedestrian is therefore a Section II matter, never an own-damage claim.
The three forms of cover
A third-party liability (TP) policy carries the liability section but no own-damage section; the owner-driver personal accident cover described below is required alongside it. It is the legal minimum: section 146 of the Motor Vehicles Act, 1988 requires every motor vehicle on the road to have it.
A standalone own-damage (OD) policy covers loss of or damage to the insured vehicle. It can be bought from any general insurer, but only where a valid TP policy is in force; the two may sit with different insurers. A comprehensive (package) policy combines both sections.
A personal accident cover for the owner-driver is also required, with limited exceptions; Section II does nothing for the owner's own injuries.
The rules today
New vehicles sold from 1 September 2018 had to carry a long-term TP policy, three years for a car and five for a two-wheeler, following a Supreme Court direction implemented by IRDAI. In August 2026 the Supreme Court directed that these terms be raised to four and six years, so check IRDAI's current requirement for a vehicle bought today.
Under Section II, liability for third-party death or bodily injury carries no rupee limit, while property damage is limited to ₹7.5 lakh in the standard private-car policy and ₹1 lakh in the two-wheeler policy. TP premium rates are notified by the Central Government in consultation with IRDAI.
Under Section I, the policyholder bears a compulsory deductible on every own-damage claim: ₹1,000 for a private car up to 1500 cc and ₹2,000 above, under terms carried over from the India Motor Tariff. An insurer may impose a higher amount for a particular risk.
What add-ons do
Add-ons extend the own-damage cover for an additional premium. Zero Depreciation removes the depreciation deduction on replaced parts, Return to Invoice pays the invoice value on a total loss or theft, and Roadside Assistance arranges help when the vehicle is stranded.
Engine Protect fills a specific gap. Flood is an insured peril, but standard policies generally exclude consequential engine damage such as hydrostatic lock from starting or driving a waterlogged vehicle. The add-on is designed to cover that, subject to the insurer's wording.
Rules at a glance
One skid, three losses
Arjun, 41, drives a 1200 cc hatchback in Nagpur under a package policy. One evening he skids, dents his own bonnet, injures a cyclist and damages a parked scooter.
The bonnet is a Section I claim, paid on the assessed repair cost less the ₹1,000 compulsory deductible. The cyclist's injury and the scooter are Section II claims: the injury with no rupee limit, the scooter within the ₹7.5 lakh property limit. With a TP-only policy the third parties would still be protected, but Arjun's bonnet would not.
When property damage exceeds the limit
- A private car under the standard policy damages a showroom front; compensation is fixed at ₹9,00,000.
- Policy limit for third-party property damage: ₹7,50,000.
- Amount beyond the limit = ₹9,00,000 − ₹7,50,000 = ₹1,50,000.
Result. The insurer answers for ₹7,50,000; the remaining ₹1,50,000 stays with the vehicle owner. For a third party's injury there would be no rupee limit.
Key points
- Third-party liability cover is compulsory under section 146 of the Motor Vehicles Act, 1988; own-damage cover is not required by the Act.
- In the package policy, Section I is own damage and Section II is liability to third parties.
- A standalone OD policy can come from any general insurer, provided a valid TP policy is in force.
- Add-ons such as Zero Depreciation, Engine Protect, Roadside Assistance and Return to Invoice extend the own-damage cover, on each insurer's terms.
Common misunderstandings
- Comprehensive does not mean everything is paid: depreciation, deductibles and exclusions still apply.
- A long-term TP policy on a new vehicle does not include own-damage cover; that needs Section I, in the same or a separate policy.
- A flood claim is not automatically an engine claim: engine damage from starting or driving a waterlogged vehicle is generally excluded unless an Engine Protect add-on applies.
Questions people ask
Is a third-party policy enough to meet the legal insurance requirement?
Yes for the liability requirement: it is the legal minimum under section 146 of the Motor Vehicles Act, 1988, and owner-driver personal accident cover is a further requirement, with limited exceptions. But it pays nothing for damage to or theft of the insured vehicle.
Can own-damage cover be with a different insurer?
Yes, from any general insurer, as long as a valid TP policy is in force.
Does the compulsory deductible apply to third-party claims?
No. The policyholder bears it on own-damage claims; third-party victims are compensated under Section II.
What this lesson relies on
- Motor Vehicles Act, 1988 — section 146 (compulsory third-party insurance)
- India Motor Tariff — standard package policy wording (Sections I and II, compulsory deductible, third-party property damage limits), as carried into current motor policies
- IRDAI direction on long-term third-party policies for new vehicles, effective 1 September 2018, implementing a Supreme Court direction
- Supreme Court direction of 4 August 2026 on long-term third-party policy terms
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.