IRDAI Four-Layer Motor Insurance Rules will change how private car and two-wheeler owners choose their insurance protection from December 15, 2026.
The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a new structure that separates motor insurance into four distinct sections, allowing customers to understand which protections are compulsory and which are optional.
The new framework aims to make motor insurance policies more transparent and help vehicle owners make informed decisions before purchasing coverage.
Insurance companies will also have to disclose the premium charged for each section separately.
The changes follow a Supreme Court directive in the case of National Insurance Company Ltd versus Thungala Dhana Laxmi and Others.
IRDAI issued the revised instructions on November 2, 2026, directing general insurers to implement the new structure.
IRDAI Four-Layer Motor Insurance Rules: What Are the Four Covers?
Under the revised framework, motor insurance policies for private cars and two-wheelers will be divided into four sections.
The first section covers third-party liability insurance. This protection is mandatory and covers the vehicle owner’s legal liability for injury, death or property damage caused to another person in an accident.
The second section covers legal liability towards occupants or pillion riders, including employees of the insured. This protection will be optional and can be purchased by paying an additional premium.
The third section covers personal accidents.
Personal accident protection for the owner-insured remains mandatory under applicable rules, while additional protection for occupants, pillion riders and drivers other than the owner-driver can be selected separately.
The fourth section covers loss of or damage to the insured vehicle.
Commonly known as own-damage insurance, this protection is optional and covers damage to the policyholder’s own vehicle under the terms and conditions of the policy.
The four sections will help customers distinguish between basic legal protection and additional coverage that can provide financial support after an accident.
Which Motor Insurance Covers Will Be Mandatory?
Not all four sections will be compulsory under the new arrangement.
Third-party liability insurance will remain mandatory for private vehicles, while personal accident protection for the owner-insured will continue to follow existing compulsory insurance requirements.
Occupant or pillion rider liability coverage will remain optional. Similarly, additional personal accident protection for passengers and other eligible drivers can be selected according to the customer’s requirements.
Own-damage insurance will also remain optional. Vehicle owners can decide whether they want additional financial protection against damage to their own cars or two-wheelers.
This distinction is important because purchasing only mandatory third-party insurance does not provide the same protection as a comprehensive motor insurance policy.
Customers should therefore carefully examine the coverage available before deciding which sections to purchase.
Insurers Must Provide Customer Option Form and Information Sheet
One of the important changes is the introduction of a standard customer option form.
Insurance companies will have to provide this form to customers purchasing policies for private cars and two-wheelers.
Buyers will be able to select their preferred coverage by ticking the relevant options, whether they purchase insurance online or offline.
The completed option form will become part of the insurance policy. Obtaining this form from customers will be mandatory for insurers.
IRDAI has also made it compulsory for insurance companies to issue a Customer Information Sheet (CIS) at the time of purchase.
The document will explain the coverage available under each section and help customers understand the protection they are selecting.
Another important requirement is that insurers must separately disclose the actual coverage and premium charged for every section in the policy schedule.
This will allow vehicle owners to understand how much they are paying for third-party liability, occupant protection, personal accident benefits and own-damage coverage.
Existing Policyholders Can Add Occupant Cover
The revised framework also provides an option for people who already have third-party motor insurance.
Existing policyholders will be able to add legal liability protection for occupants or pillion riders during the currency of their current policy by paying an additional premium.
They will not need to cancel their existing third-party insurance to obtain this additional protection.
However, the additional cover must be purchased from the same insurance company that issued the existing third-party policy.
The protection will become effective from the date and time mentioned in the endorsement issued by the insurer.
This provision gives existing vehicle owners an opportunity to increase their insurance protection without purchasing an entirely new third-party policy.
Will Motor Insurance Premiums Increase?
The new framework does not prescribe a uniform premium for all four sections. Instead, insurance companies must disclose the premium charged for each selected component.
This will make it easier for customers to compare the cost of different protections and understand how their final insurance premium is calculated.
Insurers will retain the flexibility to design additional coverage options and determine the pricing of own-damage insurance according to market conditions.
They can also modify certain exclusions and conditions depending on the coverage selected, provided the basic protection prescribed under the four-layer structure is not restricted.
Therefore, the new framework should not automatically be interpreted as a blanket increase in motor insurance premiums.
The final amount will depend on the coverage selected, the insurer’s pricing and the applicable policy conditions.
When Will the New Motor Insurance Rules Start?
The revised four-layer motor insurance structure will come into force on December 15, 2026. All policies issued from that date will have to follow the new requirements.
IRDAI has directed general insurers carrying out motor insurance business to adopt standardised policy wording and implement the mandatory customer option form and information sheet.
Insurance companies must also complete integration with Bima Sugam by December 15 so that the revised policies are available through the digital insurance marketplace.
For vehicle owners, the biggest benefit will be greater clarity about what their insurance actually covers.
Before purchasing or renewing a policy, customers should compare the available protection, check the premium for each section and select coverage based on their vehicle and financial requirements.
