Cars have to be insured on a yearly basis as car insurance policies are valid for upto a year only.

Broadly speaking, car insurance policies differentiate from each other on the basis of the extent of coverage provided by them. In India, auto insurance coverage comes in two types:
i. Third Party Insurance
ii. Comprehensive Insurance

Third Party Insurance: Third party insurance policy provides limited coverage. As the name suggests, it provides protection against losses arising out of damage/ injury to other people's property or to other people in cases of accidents in which the individual is legally liable to pay. But, it does not provide for the losses suffered due to damage caused to the the insured's car or injury to self.

Indian law makes it mandatory for every car to be insured with a minimum of third party insurance policy.

Comprehensive Insurance :Comprehensive coverage provides protection from losses arising out of damage to vehicle insured (own car) and injury to self in addition to third party risk. With a comprehensive insurance policy all kinds of damage to car, due to factors like accidents, fire, natural calamities( flood, earthquake), theft, riots, terrorist activity etc, are taken care of.

It is because of its wide nature of risk coverage that often new car buyers are advised to go in for a comprehensive insurance policy.