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Beginner's Guide on Multi-Year Car Insurance

Team AckoJan 17, 2024

You might have heard that a car insurance policy needs to be renewed on an annual basis. Renewing car insurance every year is considered to be a tedious task by people and they tend to ignore it altogether. Thus, they are not only breaking the law but are also putting themselves at a major financial risk. To avoid being in this situation, the Insurance Regulatory and Development Authority of India (IRDAI) decided to make multi-year policies mandatory for car owners from 1st September 2018 .




As the name suggests, a multi-year car insurance policy is valid for more than one year. The car owner does not have to keep renewing the policy on a yearly basis. This also means that a financial cover remains intact for a longer time. First, let’s understand which aspect of a car insurance policy is mandatory.

The Mandatory Aspect

Buying a car insurance policy is mandatory in India as per The Motor Vehicles Act of 1988. According to the new rule, it is compulsory for every car owner to purchase at least a multi-year third-party insurance policy for their car. Existing car owners can continue to buy short-term policies. Buying the own-damage cover is not compulsory. Thus, buying a comprehensive car insurance policy is not mandatory.

As the name suggests, a third-party car insurance policy protects the policyholder from financial losses caused to the third-party. A third party can be anyone other than the owner him/herself or passengers of the insured car. Thus, drivers of other vehicles, pedestrians, hawkers, etc. would be considered as the third party. Without third-party insurance, the owner will have to pay any expenses incurred all by himself/herself.

For example, consider car driver A, who owns a hatchback car, accidentally got into an accident with driver B, who owns a sedan car. If driver A has been found to be at fault that caused the accident, any damage to driver B’s car needs to be borne by driver A. It is common knowledge that the cost of repairing/replacing parts of a sedan car is high. In this scenario, third-party insurance will come to driver A’s rescue here. Without it, he would have to bear the entire cost from his pocket.

Also, read: Temporary (Short-term) Car Insurance

Coverage options for multi-year policies

1. Long-term comprehensive policy

A car owner can choose to buy multi-year third-party (TP) car insurance plus multi-year own-damage (OD) insurance for the car. This is the best option if you forget to renew your car insurance policy in time. Buying such an extensive multi-year policy will be beneficial in the long run as your premium is protected from yearly hikes. However, the cost of this policy will be slightly on the higher side as compared to the following options.

2. Long-term TP short-term OD

The next option is to buy a 3+ year third-party car insurance along with 1 year of own damage coverage. The cost of your policy will be less than a long-term comprehensive policy, however, the option of annual renewal will be applicable here. You will have to renew the own damage component of your car insurance policy each year to stay financially protected against damages caused to your car.

3. Long-term Third-party coverage

Another option is to completely skip buying the own damage component and purchase only multi-year third-party insurance. This will be the most pocket-friendly option, however, note that any damage to your car will not be covered and you need to bear all the expenses related to own damage. This option could leave you underinsured in spite of buying a car insurance policy.

The bottom line

You need to buy third-party car insurance online or by any offline means to remain on the right side of the law. Doing this will ensure financial safety. Buying third-party car insurance online is the easiest option available and is more beneficial than their offline counterparts.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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