When running a business in India, insurance isn’t just about managing risk—it’s also about staying compliant with the law. While many types of commercial insurance are optional and aimed at protecting your assets, some policies are legally mandated depending on the nature and scale of your operations.
In this blog, we’ll walk you through the mandatory commercial insurance policies under Indian law, and explain who needs them and why.
1. Motor Insurance (Third-Party Liability)
Mandatory for:
All businesses that own and operate commercial vehicles—cars, vans, trucks, ambulances, etc.
Why it’s required:
Third-party motor insurance protects against legal and financial liability arising from injury, death, or property damage caused to a third party due to a vehicle accident.
Legal Reference:
Motor Vehicles Act, 1988
As per IRDAI, third-party insurance is non-negotiable
2. Public Liability Insurance (For Certain Industries)
Mandatory for:
Businesses involved in hazardous processes (e.g., chemical manufacturing, heavy engineering, oil & gas, etc.)
Why it’s required:
To cover claims from the public in case of injury, death, or property damage caused by hazardous operations.
Legal Reference:
Public Liability Insurance Act, 1991
Rule: Businesses handling hazardous substances must carry this policy
3. Workmen Compensation Insurance (Employees’ Compensation Act, 1923)
Mandatory for:
Any business that employs workers involved in manual, hazardous, or field-related work.
Why it’s required:
To protect employees against injury, disability, or death caused during the course of employment. It also covers the legal liability of the employer in such cases.
Legal Reference:
Employees’ Compensation Act, 1923
Factories Act, 1948 (indirectly reinforces liability)
4. ESIC (Employee State Insurance Corporation) Contribution
While not a traditional “insurance policy” sold by insurers, ESIC functions as a state-managed insurance system.
Mandatory for:
Employers with 10 or more employees earning ₹21,000/month or less
What it covers:
Medical care, maternity, sickness benefits, and compensation for employment injury or death.\ Legal Reference:
ESI Act, 1948
Optional but Highly Recommended Commercial Policies
While not mandatory, these policies are strongly recommended for risk protection:
Fire & Property Insurance – Protects business premises and assets
Group Health Insurance – Improves employee retention and morale
Professional Indemnity – Essential for service-based businesses
Business Interruption Insurance – Covers loss of income due to disruptions
Stay Compliant, Stay Covered
Skipping mandatory insurance can result in legal penalties, fines, or even business shutdowns. Whether you’re running a factory, operating vehicles, or employing labor, it’s crucial to know which insurance laws apply to you.
Stay compliant. Protect your people, your business, and your future.
Need help understanding what your business legally needs?
Consult us to ensure your company is both protected and legally sound.
Email: info@insuranzee.com
Contact +91-9202677297