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MVA 1988 (Amended 2019)ORIGINALChapter VII
Section 147
Requirements of Policies and Limits of Liability
Insurance of Motor Vehicles Against Third-Party Risks
Fine: N/ACompoundable: N/AEndorsement: No
BARE ACT PROVISION
Legal Text
In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which — (a) is issued by a person who is an authorised insurer; and (b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2) — (i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person, including owner of the goods or his authorised representative carried in the vehicle, or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; (ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. Provided that a policy shall not be required to cover liability in excess of rupees seven lakh and fifty thousand in respect of damage to any property of a third party.
Simplified Explanation
Section 147 defines what constitutes a legally compliant insurance policy — the coverage requirements that a policy must satisfy to fulfil the Section 146 mandatory insurance obligation. Two key requirements: (1) the policy must be issued by an authorised insurer (IRDAI-licensed); and (2) it must provide specific minimum coverage. For personal injury and death: unlimited liability — there is no statutory cap on the insurer's liability for death or bodily injury to third parties. This is the cornerstone of India's accident compensation system — MACT awards can be in crores, and the insurer must satisfy them in full. For property damage: the statutory limit is ₹7.5 lakh — damage to third-party property beyond this amount is the vehicle owner's personal liability. This ₹7.5 lakh cap, last revised in 2019, is widely regarded as inadequate given current property values. The section also extends mandatory coverage to passengers in public service vehicles (buses), recognising their special vulnerability as members of the public using transport services.
Historical Context
The unlimited liability for personal injury (death and bodily injury) is India's most significant and distinctive insurance feature — most countries have caps. The Indian Supreme Court has consistently awarded substantial compensation in MACT cases, with awards frequently exceeding ₹50 lakh and sometimes reaching several crores for young, high-income victims.Critical Changes
Property damage cap raised from ₹6,000 to ₹7.5 lakh (dramatic increase acknowledging inflation) — 2019 Amendment.
Unlimited personal injury liability preserved — no cap introduced despite industry lobbying.
Passengers in public service vehicles now explicitly covered under the mandatory policy.
Practical Scenarios
"An accident where a pedestrian dies — insurer has unlimited liability; MACT may award ₹1.5 crore."
"An accident damaging a Porsche worth ₹1 crore — insurer pays only ₹7.5 lakh; owner personally liable for ₹92.5 lakh balance."
Common Queries
No — under Section 147, third-party liability for death and personal injury is unlimited. The insurer must pay whatever amount the MACT awards, which can be lakhs or crores depending on the victim's income and circumstances. Only property damage has a cap (₹7.5 lakh).
Yes, but only up to ₹7.5 lakh. If you damage a luxury car worth ₹50 lakh, your TP insurance covers only the first ₹7.5 lakh — the balance is your personal liability. This is why comprehensive insurance (which has higher property damage coverage) is important for owners of high-value vehicles.