| The renewal SMS lands every October. The premium has crept up. The car is now eight years old. Somewhere between "I always took comprehensive" and "third-party is enough now" sits a decision worth ₹40,000 over the next five years. |
The Short Version (2-Minute Read)
1. Third party premium is fixed by the government, comprehensive is not. A 1,200 cc car pays ₹3,416 plus GST in TP — same number across every insurer. Comprehensive on the same car varies ₹6,500 to ₹11,000 depending on insurer, IDV and add-ons.
2. Zero depreciation disappears at year 5-7. The add-on that made comprehensive worth buying for new cars is unavailable on most cars over 5 years old. After that, your "comprehensive" policy applies 50% depreciation on plastics, rubber, tyres and airbags — and 40-50% on metal parts after year 5.
3. IDV becomes a negotiated fiction after year 5. The statutory depreciation grid only goes up to 50% at year 5. Beyond that, India Motor Tariff GR.8 says IDV is "determined on the basis of an understanding between the insurer and the insured." For a 10-year-old car, this typically means 60-75% of true market value.
4. The 75% rule turns small accidents into total losses. If repair cost exceeds 75% of IDV, the insurer declares Constructive Total Loss and pays only the IDV — not the repair. On a low-IDV old car, a moderately bad accident can force a forced surrender at well below replacement cost.
5. The break-even rule of thumb. If your annual comprehensive premium is more than 10% of your IDV, or if your IDV has fallen below ₹1.5 lakh, third-party-only is almost always the rational choice. Just keep ₹15 lakh of personal accident cover separately.
Full breakdown, statute citations, three real-car worked examples, and the depreciation grids below.
By Dinesh Kumar S · Published January 12, 2026 · 13 min read
Last verified against IRDAI Master Circular on Motor Insurance dated 11 June 2024 and MoRTH Notification G.S.R. 394(E) dated 25 May 2022 on 24 April 2026.
The renewal SMS arrives every October. Same insurer, same car, slightly higher premium than last year. You glance at it, mean to look properly later, forget, and then click pay two days before expiry because the alternative is driving uninsured. This is how most Indian car owners renew their motor insurance — by pattern, not by decision.
If your car is over seven years old, you are probably overpaying by ₹4,000 to ₹8,000 per year for coverage that will not pay you what you think it will when you actually need it. Not because comprehensive insurance is a scam, but because the comprehensive policy you bought when the car was new is no longer the same product on a car that is now eight, ten or twelve years old. Two add-ons have silently dropped off, the depreciation rules have started biting harder, and the IDV — the most important number on the entire policy — has become a figure your insurer chooses with very little check from anyone else.
This article walks through what changes for an old car, the math on three real cars at three different ages, and the five-question framework I now use whenever a friend or family member shows me their renewal SMS. Some of what is written here will sound like advice against the insurance industry. It is not. The third-party premium funds road accident victim compensation under the Motor Vehicles Act. That is a public good worth paying for, and Section 146 of the Act makes it mandatory anyway. The question this article tries to answer is narrower: should you keep adding the comprehensive layer on top, on a car where the comprehensive layer no longer pays its weight.
In This Article
▸ What the Law Actually Requires — And What It Does Not
▸ What Comprehensive Adds — In Plain Language
▸ The IDV Trap — Why Your Old Car's "Value" Is a Number Your Insurer Chooses
▸ The Depreciation Bite — Why Old-Car Claims Pay Less Than You Expect
▸ Three Real Cars at Three Ages — The Rupee Math in 2026
▸ The Third Option Nobody Mentions — Standalone OD With a Different Insurer
▸ The Five Questions to Ask Before You Click Pay
What the Law Actually Requires — And What It Does Not
The starting point is Section 146 of the Motor Vehicles Act, 1988, which prohibits any person from using a motor vehicle in a public place without "a policy of insurance complying with the requirements of this Chapter." The relevant requirement, set out in Section 147 of the same Act, is third-party liability cover — protection for people other than you whom your vehicle might injure or kill, and for property you might damage. This is the only insurance the law cares about. Driving without it is an offence under Section 196, which the Motor Vehicles (Amendment) Act, 2019 amended with effect from 1 September 2019 to impose a fine of ₹2,000 for the first offence, ₹4,000 for any subsequent offence, and a possible imprisonment of up to three months in either case.
Comprehensive insurance is not a separate product. It is third-party cover plus an "Own Damage" component on the same policy — protection for damage to your own car. The own-damage layer is voluntary at law. Your insurer would prefer you not know this, because the entire profit margin on motor insurance lives in the own-damage component. The third-party portion is loss-making for the industry — IRDAI's own annual filings put motor third-party loss ratios above 80 percent year after year — which is why the third-party premium rates are fixed by the Government of India through gazette notification, not by the insurer.
The current rates were notified by the Ministry of Road Transport and Highways through Notification G.S.R. 394(E) dated 25 May 2022 (the "Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022"), with effect from 1 June 2022, and have not been revised by any superseding notification through April 2026 — despite IRDAI's mid-2025 recommendation of an 18 to 25 percent hike that was reported in the financial press but never gazetted. For a private car not exceeding 1,000 cc, the annual third-party premium is ₹2,094. For 1,000 to 1,500 cc, ₹3,416. For above 1,500 cc, ₹7,897. Electric vehicles get a 15 percent discount on these rates. Add 18 percent GST and the compulsory ₹15 lakh personal accident cover at ₹750 a year, and the total out-of-pocket for liability-only insurance on a 1,200 cc Swift comes to roughly ₹4,400 to ₹4,500 in 2026.
That is the floor. Below it, you are breaking the law. Above it, every additional rupee is a choice — yours, not your insurer's, and not your bank's, and not your previous renewal pattern's.
What Comprehensive Adds — In Plain Language
The comprehensive policy adds protection against six broad categories of own-damage: accidental collision, fire and self-ignition, theft of the vehicle or its parts, riot or strike or terrorist damage, natural perils like flood and earthquake and cyclone, and damage in transit by road, rail, air or inland waterway. It pays the cost of repairing your vehicle when you are at fault in an accident — third-party only pays for the other side. It pays out an Insured Declared Value if your car is stolen and not recovered, and it pays an IDV if a flood writes off the car. None of this is small. For a new ₹15 lakh hatchback, comprehensive cover is genuinely worth its premium because the worst-case loss is ₹15 lakh and the premium is roughly ₹15,000 to ₹20,000 a year — about 1 to 1.3 percent of the asset's value.
The relationship breaks down as the car ages. Two specific things happen.
The first is that the IDV — the maximum amount the insurer will pay you in a total loss — falls steeply through year five and becomes a negotiated number afterwards, which the next section addresses. The second is that the value of the most popular comprehensive add-on, zero depreciation, falls off entirely. Most Indian general insurers limit zero-depreciation cover to vehicles aged five to seven years. Acko caps it at five. HDFC ERGO and Bajaj Allianz extend to seven on certain models. Past that age, no insurer in India offers zero depreciation on a private car. What this means in practice is that the "comprehensive" cover you buy on an eight-year-old car is structurally a different product from the comprehensive cover you bought on the same car when it was new. The premium you pay is similar. The protection it actually delivers in a partial-loss claim is materially weaker, because depreciation now eats into every part replaced.
This is not theoretical. It is written into the policy wordings, which are themselves derived from the General Regulations of the India Motor Tariff, 2002 — the foundational policy document of motor insurance in India. The Authority de-notified motor tariff rates from 1 April 2024, but the policy wordings, exclusions, and depreciation grids in the IMT remain the operative reference text that every Indian general insurer uses for partial-loss settlement.
| The two curves cross somewhere between year 8 and year 10 for most cars. After that, your annual comprehensive premium is buying you a maximum payout that is closer to your premium than to your car's actual market value. |
The IDV Trap — Why Your Old Car's "Value" Is a Number Your Insurer Chooses
Insured Declared Value is defined in General Regulation 8 of the India Motor Tariff, 2002. It is calculated as the manufacturer's listed selling price for the make, model and variant at the start of the policy period, adjusted downwards by a depreciation schedule. The schedule is fixed by the same regulation and goes like this: 5 percent for cars up to six months old, 15 percent for six months to one year, 20 percent for one to two years, 30 percent for two to three years, 40 percent for three to four years, and 50 percent for four to five years. So far, so mathematical.
The trouble starts at the next line of the regulation. For vehicles over five years old and obsolete models, GR.8 reads: "the IDV of the vehicle and accessories thereon is to be determined on the basis of an understanding between the insurer and the insured." There is no further depreciation grid. There is no industry-published reference table. The General Insurance Council's own IDV portal acknowledges the gap in plain language: "For vehicles above 5 years of age, the problem is to arrive at a mutually agreed value … there are many third party agencies like Red Book, Auto Risk etc, which provide IDV but the same is not authenticated or endorsed by Regulator or Industry Council."
What this means for you, as the owner of an eight-year-old Swift, is that the IDV your insurer offers — say, ₹2.2 lakh — is a number their underwriting system generated using their internal logic, which you have no contractual right to inspect. You can negotiate it upwards within a band, typically 10 to 15 percent in either direction. You cannot force the insurer to use OLX or Cars24 or your own assessment. The "mutual understanding" in the regulation is a polite way of saying the insurer leads and you follow.
This matters because the IDV is the absolute ceiling on what you can ever recover from a comprehensive policy. If your car is stolen and not recovered, you get the IDV — not the resale value, not the replacement cost, not the price you paid. If a flood writes off the car, same thing. And there is one more rule that compounds the problem: General Regulation 8 also defines Constructive Total Loss as the situation "where the aggregate cost of retrieval and/or repair of the vehicle subject to terms and conditions of the policy exceeds 75% of the IDV." Cross that 75 percent threshold and the insurer can declare a CTL and pay you only the IDV instead of the repair. For a car with an IDV of ₹2 lakh, a repair estimate of ₹1.6 lakh forces a total loss declaration. You hand over the car, the insurer sells it for salvage, you receive ₹2 lakh, and you go shopping for a replacement at current market prices that are usually 20 to 40 percent higher than the IDV you just received.
This is not insurer misbehaviour. This is the policy doing exactly what the contract says. The misbehaviour, when it happens — and it does happen — is when insurers settle even total-loss claims below the IDV by treating the IDV as a ceiling rather than as the agreed market value. IRDAI has penalised this practice. A 2014 inspection of HDFC ERGO's FY 2009-10 and 2010-11 motor settlements found systematic settlement at "non-standard" reductions of up to 25 percent below the IDV in total loss and theft claims, in violation of the GR.8 rule that the IDV "shall be treated as the Market Value throughout the policy period without any further depreciation for the purpose of TL/CTL claims." The Authority issued a financial penalty and a compliance directive. The case is on the IRDAI website (document ID 390148) and is worth reading if you want to understand how slow the recourse machinery actually is when an insurer settles a total-loss claim below the IDV.
The Depreciation Bite — Why Old-Car Claims Pay Less Than You Expect
Partial-loss claims — the everyday scrape, the bumper damage, the hailstorm dent — are governed by a different schedule, set out in General Regulation 9 of the India Motor Tariff. Some parts have flat depreciation regardless of vehicle age: rubber, nylon and plastic parts, tyres and tubes, batteries, and airbags carry a flat 50 percent depreciation, applied to the cost of the part before the insurer pays. Fibreglass components carry 30 percent. Glass carries no depreciation. On painting, depreciation is 50 percent on the material cost component of the bill, which the industry typically interprets as 25 percent of the total painting bill.
For metal parts and wood, the schedule is age-based: nil up to six months, 5 percent for six to twelve months, 10 percent for one to two years, 15 percent for two to three years, 25 percent for three to four years, 35 percent for four to five years, 40 percent for five to ten years, and 50 percent for cars over ten years.
| Vehicle Age | Metal Parts | Plastic / Rubber / Tyres / Battery / Airbag |
| Up to 6 months | Nil | 50% |
| 6 months to 1 year | 5% | 50% |
| 1 to 2 years | 10% | 50% |
| 3 to 4 years | 25% | 50% |
| 4 to 5 years | 35% | 50% |
| 5 to 10 years | 40% | 50% |
| Over 10 years | 50% | 50% |
Apply this to a typical bumper-and-headlight repair on an eight-year-old Swift. The garage estimate is ₹38,000 — roughly ₹18,000 for the plastic bumper assembly, ₹8,000 for one headlight unit, ₹6,000 for paint, ₹4,000 for labour, ₹2,000 for fasteners and small fittings. The insurer's surveyor processes it like this. Plastic bumper, 50 percent depreciation, insurer pays ₹9,000. Headlight, plastic and glass composite, surveyor typically applies 40-50 percent on the plastic housing and nil on the glass, insurer pays around ₹4,500. Paint, 50 percent depreciation on material cost (typically taken as 25 percent of total paint cost), insurer pays around ₹4,500 of the ₹6,000. Labour, paid in full at ₹4,000. Small parts at 40 percent depreciation, ₹1,200. Total surveyor allowance: roughly ₹23,200 against a ₹38,000 bill. Subtract the ₹1,000 to ₹2,500 compulsory excess that almost every old-car policy carries, and the actual cheque from the insurer settles around ₹21,000. You pay the remaining ₹17,000 yourself, and the next year your no-claim bonus drops from 50 percent to zero, costing you another ₹2,500 to ₹3,500 on next year's renewal.
You can see why the comprehensive math has shifted. On a new car with a zero-depreciation add-on, all the depreciation in that example would have been waived and the surveyor would have allowed close to the full ₹38,000. On an eight-year-old car without that add-on available, the comprehensive policy is paying you slightly more than half the bill in exchange for a premium that has dropped from ₹15,000 in year one only to about ₹7,500 to ₹9,000 in year eight. The premium fell, but the protection fell faster.
Three Real Cars at Three Ages — The Rupee Math in 2026
Numbers help. Here are three representative private cars in three different age bands, with the third-party-only premium next to the comprehensive premium and the recommended call.
| Profile | 7-year Maruti WagonR (1.0L) | 10-year Hyundai i20 (1.2L) | 12-year Honda City (1.5L) |
| Indicative IDV | ₹2,30,000 | ₹1,80,000 | ₹1,40,000 |
| TP-only premium (incl GST + ₹15L PA) | ₹3,200 | ₹4,400 | ₹9,800 |
| Comprehensive premium (typical) | ₹7,800 | ₹9,200 | ₹15,500 |
| Annual gap | ₹4,600 | ₹4,800 | ₹5,700 |
| Premium-to-IDV ratio | 3.4% | 5.1% | 11.1% |
| Zero-dep available? | Most insurers no, some yes at extra cost | No | No |
| Honest call | Comprehensive still defensible if metro-driven | Borderline — depends on driving exposure | TP-only is the rational choice |
The 7-year WagonR is borderline-comprehensive. The premium is roughly 3.4 percent of IDV, well under the 10 percent threshold, and zero depreciation is sometimes still available. If the car lives in Mumbai or Chennai and goes through monsoon flooding routinely, the comprehensive layer is worth the ₹4,600 difference. If the car sits parked at a small-town home and is driven 20 km a day on quiet roads, the third-party route already makes more sense.
The 10-year i20 sits in the genuine grey zone. Premium-to-IDV is 5.1 percent, zero depreciation is no longer available, and the IDV at ₹1.8 lakh is just above the threshold below which I think the math tips. For a flood-zone car or a daily Bengaluru commuter, comprehensive is still defensible. For a weekend-only car in Coimbatore, switching to TP-only saves ₹4,800 a year and the only thing you lose is theft cover and own-damage cover for the ₹1.8 lakh maximum payout — minus the depreciation that will eat 30 to 40 percent of that anyway.
The 12-year Honda City is the clearest case. Premium-to-IDV at 11.1 percent crosses the threshold. The IDV at ₹1.4 lakh is below the level at which a total-loss payout is meaningful — if your car is written off, ₹1.4 lakh in 2026 cannot replace it with anything close. Zero depreciation is unavailable and partial-loss claims will face the harshest 50 percent depreciation tier on plastics and over-10-years tier on metal parts. The third-party-only route saves ₹5,700 a year, which is ₹28,500 over five years. That ₹28,500, kept in a liquid fund earning 7 percent, becomes a self-insurance buffer of approximately ₹33,000 — which is more than the IDV's salvage value in most total-loss scenarios.
None of this is to say "don't buy comprehensive on old cars." Some readers will rightly want the peace of mind, the cashless garage access, and the simpler claim experience that comprehensive provides. The point is that the math no longer makes the choice for you, the way it made the choice for you on the new car. The choice has become genuine, and it deserves a real moment of attention rather than a renewal click.
The Third Option Nobody Mentions — Standalone OD With a Different Insurer
There is a third structure that almost no one explains and that became legally available only after IRDAI's circular dated 21 June 2019, which de-linked Own Damage from Third Party for both new and old vehicles with effect from 1 September 2019. The relevant text reads: "the insurers shall make available stand-alone annual Own Damage covers (including stand-alone OD cover for fire and/or theft if opted for by the policyholder) for cars and two-wheelers, both new and old."
What this means in practice is that you can buy your third-party cover from one insurer and your own-damage cover from a different insurer, on different policies, expiring on different dates if you choose. The standalone OD policy is annual only — long-term standalone OD is not permitted — and it can only be issued if a third-party policy is already in force or is taken simultaneously. The TP insurer's name, policy number, and TP cover dates must be printed on the standalone OD policy itself.
This decoupling matters for old-car owners in two ways. First, it lets you shop the OD component aggressively without being tied to your existing TP renewal cycle. If your TP is with Tata AIG and you find that ICICI Lombard or Digit offers a meaningfully cheaper OD quote for your eight-year-old car, you can switch the OD without disturbing the TP. Second, it gives you a fallback when an insurer refuses to renew comprehensive on an old car — which happens frequently with digital-first insurers. Acko, for example, publicly states that "we are only offering Third-party insurance coverage for vehicles older than 15 years of age." If your existing comprehensive insurer refuses your renewal on a 14-year-old car, you can usually still find third-party from any insurer plus standalone OD from a separate insurer who underwrites old vehicles. The premium for this two-policy structure is typically 5 to 15 percent below an equivalent bundled comprehensive, mainly because you avoid the cross-subsidy embedded in the bundled product.
The administrative cost is mild — two policy documents instead of one, two renewal reminders, two claim numbers if you ever need both — but for cars that fall awkwardly in the 10-to-14 year band, where comprehensive renewal is increasingly difficult, this two-policy route is the cleanest legal way to maintain own-damage cover. It is also the structure that most informed motor insurance brokers will quietly recommend for a car of this age, though they rarely volunteer it because the bundled comprehensive policy pays them a slightly higher commission.
The Five Questions to Ask Before You Click Pay
The honest framework I now use, when a friend or family member shows me their renewal SMS, runs through five questions in order. None of them require expert knowledge. All of them require honesty.
One — what is the IDV the insurer is offering, and what would the car actually fetch on Cars24 or OLX today? If the offered IDV is within 10 percent of true market value, the policy is at least starting from a fair number. If the IDV is 25 percent or more below market value — which happens routinely on cars over eight years old — your maximum total-loss recovery is already so compressed that the comprehensive layer is pricing protection that does not actually protect you against replacement cost. Recheck IDV every renewal and negotiate it within the band the insurer offers.
Two — what is the annual comprehensive premium as a percentage of the offered IDV? If it is under 6 percent, comprehensive is generally still worth keeping. If it is between 6 and 10 percent, the call is genuinely close and depends on driving exposure and risk appetite. Above 10 percent, the math has flipped and you are now overpaying for protection. The 12-year-old Honda City example crosses this line; the 7-year-old WagonR does not.
Three — is zero depreciation available, and how much extra does it cost? If your insurer no longer offers zero depreciation on your car, you are buying a structurally weaker comprehensive product than you were three years ago, even though the premium has not fallen by the same amount. This single fact tilts the decision toward third-party-only on most cars over six or seven years old, regardless of any other consideration.
Four — where does the car actually live and drive? A car that lives in a flood-prone Mumbai locality, or sits exposed in a Chennai monsoon, or commutes daily through Bengaluru's accident-dense traffic, has a genuinely higher own-damage exposure that comprehensive cover meaningfully addresses. A car parked behind a gated compound in a small town and driven 4,000 km a year on quiet roads has very different exposure. The premium does not always reflect this gap, but your decision should.
Five — do you already have ₹15 lakh of personal accident cover elsewhere? The compulsory PA cover for owner-driver was raised to ₹15 lakh by IRDAI's circular dated 20 September 2018, costing ₹750 a year, and it became unbundleable from 1 January 2019 under IRDAI/NL/CIR/MOTP/200/12/2018 — meaning if you already carry a 24-hour personal accident cover (whether standalone or attached to a term policy) for at least ₹15 lakh covering death and permanent disability, the same circular says, "there is no need for a separate CPA cover to be taken." You can drop the ₹750 from your motor renewal in that case. But if you have no separate PA cover, please do not skip this on a motor policy. ₹750 a year for ₹15 lakh of accidental death and permanent disability cover is the cheapest such cover available in India by a wide margin.
Walk through these five questions before clicking pay on your next renewal. If you end up with comprehensive, fine — at least you bought it deliberately rather than by reflex. If you end up downgrading to third-party-only and pocketing the ₹4,000 to ₹6,000 difference, also fine — you have just bought yourself a small year-end self-insurance buffer that will compound over the remaining life of the car. The renewal SMS arrives every October. This year, give it the ten minutes it actually deserves.
Sources and References
▸ Motor Vehicles Act, 1988 — Section 146 (mandatory third-party insurance), Section 147 (requirements of policies), Section 196 as amended by Motor Vehicles (Amendment) Act, 2019
▸ Motor Vehicles (Amendment) Act, 2019 (Act 32 of 2019), notified Section 81 substituting Section 196 with effect from 1 September 2019
▸ Ministry of Road Transport and Highways Notification G.S.R. 394(E) dated 25 May 2022 — Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022, in force from 1 June 2022
▸ IRDAI Master Circular on IRDAI (Insurance Products) Regulations 2024 — General Insurance, IRDAI/NL/MSTCIR/MISC/90/06/2024 dated 11 June 2024
▸ IRDAI notification de-notifying general insurance tariffs (fire, motor, engineering, marine) with effect from 1 April 2024
▸ India Motor Tariff, 2002 — General Regulation 8 (IDV definition and depreciation grid; CTL 75% rule) and General Regulation 9 (parts depreciation schedule)
▸ IRDAI circular dated 21 June 2019 — delinking of Own Damage from Third Party for new and old vehicles with effect from 1 September 2019
▸ IRDAI Master Circular on Recent Developments in Motor Insurance Products, IRDAI/NL/CIR/MOT/144/06/2020 dated 8 June 2020
▸ IRDAI circular IRDAI/NL/CIR/MOTP/158/09/2018 dated 20 September 2018 — raising compulsory PA cover for owner-driver to ₹15 lakh at ₹750 premium
▸ IRDAI circular IRDAI/NL/CIR/MOTP/200/12/2018 — unbundling standalone Compulsory Personal Accident cover effective 1 January 2019
▸ IRDAI penalty order against HDFC ERGO General Insurance (document ID 390148) on motor TL/CTL settlements below IDV
▸ Supreme Court order in S. Rajaseekaran v. Union of India, W.P. (C) 295/2012, dated 20 July 2018 — long-term TP for new private cars
▸ General Insurance Council of India IDV Calculator portal at idv.gicouncil.in
▸ Insurance Information Bureau industry data on motor TP loss ratios
▸ Insurance Ombudsman case books at cioins.co.in on motor TL settlement disputes
Disclaimer: This article is for educational purposes only and does not constitute legal, tax, or insurance advice. The illustrative IDV figures, premium amounts, and worked depreciation scenarios are based on representative private-car profiles and indicative insurer pricing as of April 2026; your actual quote will depend on the specific make, model, variant, registration city, claim history, no-claim bonus, and add-ons selected. Third-party premium rates and IRDAI regulatory provisions may change with future MoRTH gazette notifications, IRDAI circulars, or Master Circular amendments. Finance Guided is not a SEBI-registered investment advisor, IRDAI-licensed insurance broker, AMFI-registered mutual fund distributor, or Chartered Accountant, and does not earn commission or referral fee from any general insurance company named or implied in this article. Always read the policy wordings carefully and obtain quotes from at least three insurers before making a renewal decision on motor insurance.
Dinesh Kumar S
Founder & Author — Finance Guided
B.Sc. Mathematics | M.Sc. Information Technology | Chennai, Tamil Nadu
Dinesh started Finance Guided because most insurance, tax and personal finance content in India is written for professionals — not for the salaried families and young IT workers who actually have to make the decisions. He writes research-based guides verified against IRDAI, SEBI, RBI, EPFO and Income Tax Department sources. No product sales. No commissions. No paid placements.
0 Comments