Buying a new car could get slightly more expensive upfront after the Supreme Court extended the mandatory third-party (TP) insurance period for new private cars from three years to four years.
The change adds one more year of TP premium to the amount buyers have to pay when purchasing a new car. The Supreme Court had originally mandated three-year TP cover for new cars in 2018. This is to address the lack of mandatory third-party insurance for nearly 56% of vehicles on Indian roads. The Court also suggested denial of fuel to uninsured vehicles. Further, state police personnel have also been encouraged to use II-B and VAHAN-linked handheld devices for real-time verification and to issue challans for violations.
Impact on On-Road Price
The additional cost due to extension of third-party insurance will depend on the car’s engine capacity, as TP insurance rates are fixed according to engine-size slabs. For 2026-27, the annual base TP premiums for private cars are:
| Engine capacity | Annual TP premium | Extra cost for 4th year (including 18% GST) |
| Up to 1,000cc | ₹2,094 | ₹2,471 |
| 1,001-1,500cc | ₹3,416 | ₹4,031 |
| Above 1,500cc | ₹7,897 | ₹9,318 |
For example:
- A 1,197cc Maruti Swift falls in the 1,001-1,500cc slab. Its additional year of TP cover would therefore add ₹3,416 before GST, or about ₹4,031 after GST.
- A 2,393cc Toyota Innova Crysta falls in the above-1,500cc slab, making the additional amount about ₹9,318 including GST.
This means the increase is not the same for every new car. The engine capacity, rather than the car’s ex-showroom price, determines the applicable TP premium slab.
The extra amount will form part of the insurance cost shown in the purchase quotation. Buyers should therefore check the insurance breakup instead of looking only at the final on-road price. This can help them see how much of the amount is going towards mandatory third-party cover and how much is being charged for other insurance components.
Impact on Car Loan
A higher on-road price can also affect the amount a buyer needs to arrange for the car. If the insurance cost is included in the amount financed by the lender, the additional TP premium can increase the loan amount as well. The buyer would then pay interest on that additional amount for the period over which it remains part of the loan.
For New-Car Buyers
For buyers planning to purchase a new car, the change means a higher insurance payment at the time of purchase, with the increase varying by engine capacity. Checking the insurance component separately in the dealer’s quotation can help buyers understand the additional amount being charged and how it affects the final on-road price.
The Supreme Court has also directed the concerned authorities to take steps to improve compliance with mandatory third-party insurance, including the use of vehicle databases for verification. With the matter listed for further hearing to review compliance with these directions, the impact on new-car buyers will depend on how the directions are implemented.