IRDAI Mandates Four-Tier Motor Insurance Structure from December 15, 2026

The Insurance Regulatory and Development Authority of India (IRDAI) has directed general insurers to introduce a four-tier structure for motor insurance policies covering private cars and two-wheelers from December 15, 2026.  

According to news reports, the new structure will separate different types of coverage, allowing policyholders to choose additional protection apart from compulsory third-party insurance. 

The directive follows a Supreme Court order in the case of National Insurance Company Ltd vs Thungala Dhana Laxmi & Others. The regulator issued the circular on Tuesday, setting out changes to policy structure, documentation and premium disclosure. 

Four Sections Under the New Structure 

Motor insurance policies will be divided into four components: third-party liability, legal liability towards occupants or pillion riders, personal accident cover and own-damage insurance. 

Third-party liability will remain compulsory under the Motor Vehicles Act. It covers the owner's legal liability for injury, death or property damage caused to another person in an accident. The other covers will be optional, subject to existing requirements for compulsory personal accident insurance. 

Legal liability cover will apply to passengers in private cars, pillion riders and employees travelling in the insured vehicle. The number of occupants covered cannot exceed the vehicle's registered seating capacity. The cover will exclude the owner-insured and immediate family members, including parents, spouse and children. 

Personal accident insurance for the owner-insured will remain mandatory. Cover for other occupants, pillion riders and drivers other than the owner-driver can be purchased separately. Own-damage insurance, which covers loss of or damage to the insured vehicle, will also remain optional. 

Insurers Must Disclose Individual Premiums 

All general insurers offering private vehicle policies must follow standardised policy wording. They will also have to collect a completed customer option form for every policy issued, recording the covers selected by the buyer. 

A Customer Information Sheet (CIS) must be provided at the time of sale through both online and offline channels. It must explain each coverage component and disclose its premium separately. 

Existing Policies and Bima Sugam 

Existing third-party policyholders can add occupant or pillion rider liability cover during the policy period by paying an additional premium, without cancelling their existing policy. 

Insurers will retain flexibility in pricing own-damage policies and introducing additional covers. They must also complete integration with Bima Sugam by December 15, 2026. 

Read More: Central Government Proposes New Import Locations in 5 States for Drugs, Medical Devices and Cosmetics! 

Conclusion  

The changes will apply to private car and two-wheeler policies from December 15, 2026. Existing policyholders can also add occupant liability cover by paying an additional premium. 

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