IRDAI introduces four-layer motor insurance structure from December 15

IRDAI's four-layer motor insurance framework for private cars and two-wheelers takes effect on December 15, 2026. It separates liability, personal accident and own-damage covers, giving customers greater choice and requiring insurers to standardise policies and integrate products with Bima Sugam

New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has introduced 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.

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Under the new framework, motor policies will be divided into four sections — third-party liability, legal liability for occupants or pillion riders, personal accident cover and own-damage cover for the insured vehicle.

Moreover, third-party liability insurance will remain mandatory, while the other covers will be optional which is subject to existing regulations relating to compulsory personal accident insurance for vehicle owners.

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.

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.

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.