IRDAI introduces four-layer motor insurance structure for cars, two-wheelers from December 15: Here's what changes for vehicle owners

The Insurance Regulatory and Development Authority of India (IRDAI) has mandated a new four-layer structure for motor insurance policies covering private cars and two-wheelers, allowing customers to choose specific covers based on their requirements, effective from December 15, 2026. The insurance regulator said the revised framework is aimed at improving customer choice and transparency by clearly separating different components of motor insurance policies. The new rules will apply to private cars and two-wheelers from December 15, following directions issued by the Insurance Regulatory and Development Authority of India (IRDAI) in line with the Supreme Court's observations in the National Insurance vs Thungala Dhana Laxmi case. The court had called for clearer insurance cover options to help vehicle owners make informed decisions, according to an ET Now report by Anurag Shah.

Under the revised framework, third-party insurance will remain mandatory, while own-damage cover will continue to be optional. Policyholders will also be able to opt for additional legal liability cover for passengers and pillion riders. Personal accident cover will be compulsory for the owner-insured but optional for other riders. Existing third-party policyholders can also add passenger liability cover by paying an additional premium. Insurers will be required to disclose the premium for each cover separately and provide customers with an option form and an information sheet.

IRDAI mandates standardised Motor Insurance Policies, Uniform Option Form and Customer Information Sheet

In addition, the regulator has directed all general insurers to adopt standardised policy wording for private cars and two-wheelers and introduce a uniform customer option form through which policyholders can select the covers they wish to purchase. Insurers will also be required to issue a Customer Information Sheet at the time of purchase, detailing the coverage available under each section and the premium charged, enabling customers to better understand their policies, according to an IANS report.

The regulator also said policyholders will be able to choose their preferred covers through both online and offline channels by completing the option form. Existing customers will also be allowed to add legal liability cover for occupants or pillion riders during the policy period by paying an additional premium, according to the report.

While policy structures and wording will be standardised, insurers will continue to have the flexibility to design new insurance products and determine pricing for own-damage covers based on market conditions. The circular was issued in compliance with a Supreme Court order in the case of National Insurance Company Ltd versus Thungala Dhana Laxmi and others, according to the insurance regulator.

Additionally, the regulator has further directed insurers to complete integration of the new four-layer motor insurance structure with the Bima Sugam platform so that the products become available on the platform from December 15, 2026.

What is third-party insurance?

Third-party insurance is a policy that protects you (the first party) from financial and legal liability if your actions cause injury, death, or property damage to someone else (the third party).