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Third party insurance compensation under motor vehicles act, 1988.

Respected Sirs,

Please help me to calculate amount of compensation that can be claimed under Motor Vehicles Act, 1988 - Third Party Insurance.

A labour died in an accident when he was on duty of the Company work. Please help me to calculate the amount of compensation that can be claimed under Motor Vehicles Act, 1988 - Third Party Insurance.

Please share any Excel spreadsheet calculator to calculate the compensation amount under Motor Vehicles Act, 1988 - Third Party Insurance.

Thank you.

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Avesh Lohiya 10 November 2025

The amount of compensation in a motor accident case mainly depends on the three things – the age, income and number of dependents of the deceased person. Tribunals calculates the amounts by using the concept multiplier, future prospect and deduction as laid down by the Supreme Court in the landmark judgments.

In Sarla Verma v. DTC (2009), The SC gave a multiplier table based on the age of the victim. It basically means the number of years the person would have continued to earn if the accident had not happened. So, younger the person, the higher the multiplier.

In National Insurance Co. Ltd. V. Pranay Sethi (2017), the Court discussed the concept of future prospects, which simply means the expected increase in the income in the future. Like 40% extra for people below 40 years, 25% for those between 40-50 and 10-15% for older people.

Along with that the Court also grants fixed amounts under conventional head such as funeral expenses, loss of estate, loss of consortium.

There is deduction also, because every person spends a part of their income on themselves. So, before calculating the family’s loss, Court deduct that portion. Which is generally one-third (1/3) of the monthly income

Now, the basic formula used by tribunals is:

Compensation = Monthly Income – Personal expenses × Multiplier + Future prospect + Conventional Heads

Let’s take an example:

Suppose a 30 years old labourer was earning Rs. 10,000 per month.

Monthly Income = 10,000

After deducting 1/3^rd for his own expenses = 6,700

Annual Income = 80,000 (approx.)

Multiplier for age 30 is = 17 (as per given in Sarla Verma case)

So, 80,000 × 17 =13,60,000

Now, add 40% for future prospects (as per Pranay Sethi case) = 5,40,000 (approx.)

Add 50,000 to 70,000 for funeral and other heads

Total Compensation = 18-20 lakhs (approx.)

This is just a simplified example to help you understand how compensation is calculated. The actual amount can vary depending on the facts of the case.