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Compulsory Insurance under Motor Vehicle Act, 1988

 


Compulsory insurance is any type of insurance an individual or business is legally required to buy. Compulsory insurance is mandatory for individuals and businesses that want to engage in certain financially risky activities, such as operating an automobile or operating a business with employees. Compulsory insurance is supposed to protect accident victims against the costs of recovering from an accident that someone else, such as another driver or an employer, has caused. 

Under the Motor Vehicles Act, 1988 in India

The Motor Vehicles Act, 1988, like the earlier Act of 1939; makes the insurance of motor vehicles compulsory. The owner of every motor vehicle is bound to insure his vehicle against third party risk. The insurance company, i.e., the insurer covers the risk of loss to the third party by the use of the motor vehicle. Thus, if there is insurance against third party risk, the person suffering due to the accident (third party) caused by the use of motor vehicle may recover compensation either from the owner or the driver of the vehicle, or from the insurance company, or from them jointly. All such persons risk of loss to whom, on account of the use of the vehicle, is required to be covered are ‘third party’ in the sense that they are other than the ‘first party’ the insurer and the ‘second party’ the insured. 

Chapter XI of the Act (Sections 145 to 164) contains provisions concerning "Insurance of Motor Vehicles against Third Party-Risks". According to Section 146, no person can use, except as a passenger, or cause or allow any other person to use a motor vehicle in a public place, unless an insurance policy against third party risks, as required by this Chapter, is in force, in relation to the use of the vehicle. 

Section 146 (1) which contains the relevant provision is as under:

"No persons shall use, except as a passenger, or cause or allow any other person to use a motor vehicle in a public place, unless there is, in force, in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter : Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991 (6 of 1991).”

Contravention of this provision is punishable under Section 196 of the Act.

 The section 196 is as under:

“Driving uninsured vehicle –Whoever drives a motor vehicle or causes or allows a motor vehicle to be driven in contravention of the provisions of Section 146 shall be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both."

All motor vehicles to be used in public places need to be insured against third party risks. The object of this provision is to protect the interest of a third party, who suffers by the use of the said vehicle. If the vehicle is insured against third party risks, the injured party can claim compensation from the insurance company.
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