IRDAI has directed general insurers to adopt a four-layer motor insurance structure from December 15, 2026, separating mandatory protection from optional covers for private cars and two-wheelers. The framework is intended to make it clearer to vehicle owners what their policies cover, what they exclude and how much each component costs.
The Insurance Regulatory and Development Authority of India said the new requirements operationalise the Supreme Court’s direction in National Insurance Company vs Thungala Dhana Laxmi. The court had asked IRDAI, in consultation with the General Insurance Council and insurers, to create a four-layer structure that would help vehicle owners make informed choices.
Under the framework, third-party liability will remain mandatory. Personal accident cover for the owner-insured will also remain mandatory in the specified circumstances. Legal liability for occupants or pillion riders, including employees of the insured, will be optional. Additional personal accident cover for occupants, pillion riders and drivers other than the owner-driver will also be optional, as will own-damage cover for the insured vehicle.
The new structure does not make all four sections compulsory. Instead, it separates the legally required protections from covers that customers may select according to their needs. IRDAI said the approach would create a documentary record of the customer’s decisions and reduce ambiguity over whether a specific risk is insured.
To standardise the process, insurers must adopt policy wordings based on drafts submitted by the General Insurance Council in consultation with the industry. They must also obtain a completed customer option form for every private-car or two-wheeler policy. The form will record the covers selected by the customer and become part of the policy documentation.
Insurers will be required to issue a Customer Information Sheet at the point of sale and provide the option form through online and offline channels. The policy schedule must separately show the actual coverage and premium charged under each section. The certificate of insurance will continue to comply with the Central Motor Vehicles Rules, 1989.
The framework also gives existing third-party policyholders the option to add legal-liability cover for occupants during the policy period by paying an additional premium. Customers must approach the insurer that issued the third-party policy, and the additional protection will begin from the date and time recorded in the endorsement. They will not have to cancel their existing third-party policy to obtain the extra cover.
While prescribing the basic structure and standard wordings, IRDAI has allowed insurers to set own-damage pricing in line with market conditions and continue innovating on coverage. Insurers may also add or remove general exclusions and conditions based on the selected cover, provided they do not restrict the basic protection prescribed under the four-layer framework.
The regulator has further directed insurers to integrate the new structure with Bima Sugam by December 15, 2026. The policies are expected to be available on the digital insurance marketplace from the date of implementation. The immediate operational change for customers will therefore be the separate presentation, selection and pricing of motor-insurance components at the time of purchase or renewal.
