Irdai To Introduce Four-Part Motor Insurance Structure From December 15

Motor insurance for private cars and two-wheelers will be split into four clearly identified sections from December 15, 2026, under a new framework issued by the Insurance Regulatory and Development Authority of India (Irdai).

The change is intended to make it easier for vehicle owners to see which risks are covered and choose protection that suits them. At present, motor policies can combine several covers, making it difficult for customers to distinguish compulsory insurance from optional protection.

Irdai’s circular directs general insurers to use standard policy wording, a customer option form and a Customer Information Sheet (CIS) for private cars and two-wheelers. The completed option form must form part of the policy. The schedule must show the cover selected and the premium charged for each section.

The framework follows a Supreme Court (SC) direction in the case of National Insurance Company Ltd versus Thungala Dhana Laxmi and others. The court had called for a four-layer structure to help vehicle owners make an informed choice.

Says Shanai Ghosh - MD & CEO, Zuno General Insurance: “The new framework provides customers with wider coverage along with clarity and choice by separating third-party liability, occupant liability, personal accident and own damage covers, with mandatory and optional components clearly distinguished. While third-party liability and personal accident cover for the owner-insured remain mandatory, the new optional covers for occupant liability and personal accident bridge the existing gap in protection for vehicle occupants.”

“Separate premium disclosures will give customers greater visibility into what they are paying for and the protection attached to each component, helping them make informed choices based on their vehicle’s usage and the protection required by its occupants. The framework creates an opportunity for insurers to offer broader and more relevant coverage while giving customers greater flexibility to create the protection they need,” adds Ghosh.

Third-Party Cover Remains Compulsory

The first section covers liability to third parties. It is mandatory under motor vehicle law and protects the insured against legal liability for injury, death or property damage caused to another person in an accident. This cover does not pay for damage to the policyholder’s own vehicle.

The second section covers legal liability to occupants of a car or pillion riders, including employees travelling in the insured vehicle. This cover will be optional and will require an additional premium. The number of occupants covered cannot exceed the vehicle’s registered seating capacity.

The third section deals with personal accident cover. Personal accident cover for the owner-insured remains mandatory under existing rules. Customers can also opt for personal accident protection for occupants, pillion riders and a driver other than the owner-driver.

The fourth section is own-damage cover, which pays for loss of or damage to the insured vehicle, subject to policy terms. It remains optional. Insurers may continue to design and price own-damage protection according to market conditions, while following Irdai’s prescribed structure and basic cover requirements.

Buyers Must Record Their Choices

At the point of sale, insurers must give customers an option form that sets out the four sections and lets them select the covers they want, whether they buy online or offline. The CIS must explain the protection offered under each section. Separate premium disclosure should help buyers understand the cost of each part of their policy.

The requirement applies to policies issued from December 15, 2026. Insurers must also make the new structure available through Bima Sugam from that date.

Existing third-party policyholders will be able to add the occupant or pillion-rider legal-liability cover during the policy period by paying an additional premium. They will have to approach the insurer that issued their third-party policy. The additional protection will begin from the date and time stated in the endorsement; it will not apply to an accident that happened before the cover took effect.

Vehicle owners should check the option form and CIS before buying or renewing a policy. Third-party insurance alone meets the compulsory liability requirement, but it does not provide own-damage cover. Protection for passengers, the owner-driver, and the vehicle depends on the sections selected and the applicable policy terms.

FAQs

What are the four sections in the new motor insurance structure?
They cover third-party liability, legal liability to occupants or pillion riders, personal accident protection, and damage to the insured vehicle.

Which covers are mandatory?
Third-party liability is compulsory. Personal accident cover for the owner-insured remains mandatory under existing rules; occupant liability, additional personal accident cover, and own-damage cover are optional.

Can existing policyholders add occupant cover before renewal?
Yes. They can add legal-liability cover for occupants or pillion riders during the policy period by paying an additional premium to the insurer that issued their third-party policy.