The nationwide enforcement of the mandatory Third-Party Vehicle Insurance, as directed by the Inspector-General of Police, Kayode Egbetokun, officially took off on February 1, 2025.
This directive aims to ensure that all motorists comply with the legally required minimum insurance coverage, which provides financial protection for third parties in the event of an accident.
The enforcement follows growing concerns over the high number of uninsured vehicles on Nigerian roads and the financial burden placed on accident victims due to a lack of coverage.
Several state police commands have already begun implementation, warning defaulters of impending penalties.
As enforcement intensifies, many Nigerians remain unaware of the policy’s crucial benefits.
Beyond legal compliance, third-party motor insurance provides financial protection that can prevent devastating losses.
Not just a legal requirement
Activist and Publisher of CrossRiver Watch, Agba Jalingo, recounted a striking example of the policy’s benefits in a post on his Facebook page.
A commercial driver’s vehicle was seized after colliding with a Range Rover, and the luxury car’s owner demanded N1.2m for repairs.
The driver, unable to raise the funds, was stranded—until he discovered that his third-party insurance policy covered the damage. Upon verification, the insurer paid the repair cost directly to a panel beater of the car owner’s choice, resolving the issue within two weeks.
Jalingo noted that many motorists underestimate third-party insurance, assuming it serves only to avoid police harassment.
In reality, an annual premium of N15,000 covers damage to third-party vehicles, medical expenses, and even legal fees—up to a maximum of N3m.
“Remember,” he cautioned, “some insurance companies don’t want you to know these benefits, so you don’t make claims. Some corrupt police officers, too, exploit this ignorance for roadside extortion.”
As the Nigeria police and insurance regulators push for stricter enforcement, cases like this highlight the policy’s vital role as a financial safety net for motorists.
How it works and why it matters
With the recent enforcement directive, conversations around vehicle insurance have intensified.
Many Nigerian drivers view insurance as merely another bureaucratic hurdle, but third-party motor insurance offers essential benefits that could save motorists from financial ruin.
Third-party motor insurance is the minimum level of insurance required by law for all vehicles on Nigerian roads.
Governed by the ‘Motor Vehicles (Third Party Insurance) Act of 1950’ and ‘amended by the Insurance Act of 2003’, it provides financial protection for damage, injuries, or death caused to another person or their property by an insured vehicle.
Unlike comprehensive insurance, which covers the policyholder’s vehicle, third-party insurance solely covers liabilities to others.
An insurance expert and operator, ThankGod Akanimoh, noted that the primary goal of this policy is to ensure that accident victims receive compensation without lengthy legal battles.
“When an insured driver causes an accident, the victim can lodge a claim with the driver’s insurance company. Upon verification, the insurer covers the cost of repairs or medical expenses up to the stipulated coverage limits,” he explained.
With the National Insurance Commission increasing third-party property damage coverage to N3m—up from N1m—this policy now provides greater security for accident victims.
Cost and coverage
Third-party insurance rates, as regulated by NAICOM, vary by vehicle type. Our correspondent gathered that private vehicles require an annual premium of N15,000, covering up to N3m in third-party damage claims.
Commercial vehicles, including staff buses and general-purpose vehicles, attract higher premiums, with coverage extending up to N5m.
Tricycles and motorcycles are also covered under the scheme, with lower premium rates reflecting their risk category.
Despite these benefits, many Nigerians remain hesitant to purchase third-party insurance, often due to misinformation or outright fraud within the sector.
With enforcement now in full swing, demand for these policies has surged. Reports indicate that the insurance sector has raked in over N253bn from motor insurance, reflecting a significant increase in compliance.
However, this boom has also given rise to fraudulent policy vendors looking to exploit unsuspecting motorists. Many roadside agents sell fake policies that do not provide coverage in the event of an accident, several reports have noted. This has led to a loss of trust in the system, with some motorists opting to forgo insurance entirely.
Experts warn that purchasing insurance from unauthorised vendors can leave motorists vulnerable. NAICOM has also advised individuals to verify insurers on its website before purchasing a policy.
Challenge of enforcement
A major concern surrounding the enforcement of third-party insurance is the role of the police.
Many Nigerians question whether the police have the authority to enforce an insurance policy designed for financial compensation rather than public safety. While the law mandates third-party insurance, the extent of police enforcement powers remains a grey area.
Despite this, police roadblocks have become hotspots for enforcing compliance, with officers checking motorists’ insurance documents. Some argue that this has created another avenue for extortion, as officers allegedly demand bribes even from motorists with valid insurance.
Speaking on the issue, the Chairman of the Nigerian Insurers Association, Ganiyu Musa, emphasised that third-party insurance provides critical financial protection for both drivers and accident victims.
“Third-party motor insurance ensures that victims receive compensation without burdening the at-fault driver with unexpected expenses,” he said. “It’s a fundamental risk management tool that promotes responsible driving.”
The Commissioner for Insurance, Sunday Thomas, also stressed its importance.
He said, “The third-party motor insurance is the minimum coverage required by law for any vehicle on Nigerian roads. It facilitates financial security for third parties and prevents unnecessary legal disputes.”
Similarly, Tope Smart, the Group Managing Director of NEM Insurance Plc, added that third-party insurance fosters accountability.
“Beyond legal compliance, it ensures that victims of road accidents are adequately compensated, creating a more responsible driving culture in Nigeria,” he stated.
Akanimoh, further lending his voice, stated, “Third-party insurance is more than just a bureaucratic requirement—it is a vital financial safeguard that protects both motorists and accident victims.
“With increased enforcement, Nigerians must understand its importance and ensure they obtain valid policies from accredited insurers.
“As enforcement intensifies, the conversation should shift from compliance to education. Only through awareness can Nigerians fully appreciate the value of third-party insurance and the security it provides in times of crisis.”
Legal requirements and implications of non-compliance
Under Nigerian laws, every motorist must have a valid third-party insurance policy before legally operating a vehicle.
Section 68 of the Insurance Act of 2003 classifies failure to possess third-party insurance as a criminal offence punishable by a fine or imprisonment.
With the recent enforcement directive issued by the IG, motorists without valid insurance now face heightened scrutiny and risk severe penalties.
Despite the obvious benefits, many Nigerian motorists remain sceptical of third-party motor insurance, often perceiving it as merely a “police pass” to avoid harassment at checkpoints.
A motorist and owner of GoodCars Essential Limited, Port Harcourt, Telema Banigo, said several widespread misconceptions had contributed to low compliance rates with the third-party insurance policy.
He added, “One of the most prevalent beliefs is that insurance companies don’t pay claims.
“While cases of delayed settlements exist, reputable insurance providers process and honour valid claims efficiently.”
Another common myth, according to Banigo, is that third-party insurance only covers minor accidents.
However, with the recent increase in coverage limits to N3m for third-party property damage, he said the policy now extends to significant incidents, including major collisions.
“Additionally, there is the belief that insurance is an unnecessary expense. At N15,000 per year, however, the cost is minimal compared to the potential financial burden of an accident, where the policyholder could be legally required to cover damages amounting to millions.
“These misconceptions have kept many Nigerians from securing policies that could otherwise protect them from financial ruin,” he added.
The reluctance
A major factor behind this reluctance is a general lack of awareness. Many drivers who spoke to our correspondent operate under the assumption that having some form of vehicle documentation is enough to satisfy law enforcement, without understanding the specifics of third-party coverage.
A commercial bus driver in Lagos, Tunji Akintunde, for instance, admitted that he had never considered the details of his insurance policy, believing that any document with an official-looking stamp would suffice during police stops.
“I have heard of it (third-party insurance), but I never really had a need to get one. Whenever they (authorities) ask, I present something else to them. If they insist, I settle (bribe) them and move on. I don’t have such money to be giving to insurance companies up and down,” he said.
From this, it is clear that economic hardship is a deterrent.
With a large proportion of Nigerians struggling to make ends meet, many prioritise immediate survival over preventive financial measures such as insurance.
A taxi driver in Abuja, Solomon Kogi, who spoke to our correspondent over the phone, admitted that he opted against renewing his third-party insurance policy, viewing it as an unnecessary expense.
“I have been renewing it for over five years and have had no need to use it. It’s like I am dashing those guys (insurance companies) my money. So, this year, I didn’t renew it, and now the IG has come to say we must have it. It’s just too much for me, honestly,” he said.
The irony, however, is that without insurance, Akintunde and Kogi stand to lose far more in the event of an accident.
Mistrust in insurance providers
There is also widespread mistrust in insurance providers, as research has shown.
Cases of prolonged claims processing or outright denials have fostered deep scepticism among motorists.
A taxi driver in Port Harcourt, Rivers State, who gave his name as Sotonye, for instance, said he lodged a claim after a minor accident but was met with frustrating delays.
“These insurance companies are only interested in collecting premiums, not in paying claims. They don’t fulfil their own end of the bargain, and it is heartbreaking,” he said.
Compounding the problem is the prevalence of counterfeit insurance certificates.
Many motorists, particularly those in smaller cities and rural areas, unknowingly purchase fake policies from roadside agents.
A taxi driver in Aba, Abia State, Fidelis Onu, recounted his experience of purchasing what he believed to be a legitimate third-party insurance certificate.
It was only after he was involved in an accident that he realised his policy was fraudulent, leaving him financially stranded.
“I had to cough out over N700,000 of my own personal money to sort out the mess. That is the problem. There are many fakes out there,” he noted.
Avoiding fake insurance policies
As demand for third-party insurance surges, fraudulent insurance agents have capitalised on unsuspecting motorists, selling fake policies that hold no legal or financial validity.
To avoid falling victim to these scams, motorists must take proactive steps when purchasing their policies.
The safest approach, several experts have noted, is to buy insurance directly from a provider licensed by the National Insurance Commission.
The Nigerian Insurance Industry Database also allows vehicle owners to verify the authenticity of their policies through an online portal or a USSD code.
Genuine insurance companies provide official certificates, and motorists should always request receipts as proof of payment.
The process of obtaining a genuine policy
For those looking to obtain third-party insurance, the process is relatively straightforward.
The first step is selecting a reputable insurance provider. NAICOM maintains a list of licensed insurers, and motorists should verify their chosen provider’s credentials before proceeding.
Once a provider is selected, the applicant must present essential documents, including vehicle registration details, proof of ownership, and a valid driver’s licence.
After filling out a proposal form with accurate information, the motorist is required to pay the premium, which varies depending on the vehicle type.
Upon payment, a certificate of insurance is issued, which should be verified through the NIID to confirm its authenticity.
Understanding the terms and conditions of the policy is crucial. Many motorists fail to review coverage limits and exclusions, only to be caught off guard when attempting to make a claim. By taking the time to understand their policies, motorists can ensure they are adequately protected.
The broader impact of enforcement
The renewed enforcement of third-party insurance is more than just a bureaucratic exercise; it is a strategic move towards financial and legal accountability on Nigerian roads.
Too often, accident victims are left without compensation because at-fault drivers lack insurance coverage.
A fully implemented third-party insurance system ensures that victims receive compensation without the burden of costly legal battles.
Beyond individual benefits, the policy has far-reaching economic implications. With more drivers enrolled in insurance schemes, the industry will see greater financial stability, leading to job creation, enhanced claims-processing mechanisms, and improved consumer trust in the sector.
Third-party motor insurance is far more than a legal obligation; it is an essential financial safeguard. With the police now enforcing compliance, motorists must take the necessary steps to ensure they possess valid insurance.
Beyond avoiding fines and legal consequences, having a legitimate policy can be the difference between financial security and economic hardship in the aftermath of an accident.
According to Thomas, third-party motor insurance is the minimum coverage compulsorily required by law for any vehicle on Nigerian roads, guaranteeing not just the safety of the driver but also that of other road users.
Nigerian motorists must move beyond viewing insurance as a mere formality and recognise its role as a crucial tool for financial security and legal protection.
