Daijiworld Media Network – New Delhi
New Delhi, Nov 14: The Insurance Regulatory and Development Authority of India (IRDAI) has directed general insurance companies to introduce a new four-part motor insurance structure for private cars and two-wheelers from December 15, 2026, bringing greater transparency and flexibility to vehicle owners in choosing insurance coverage.
The revised framework, issued in compliance with a Supreme Court order, will separate compulsory third-party liability insurance from additional covers relating to passengers, personal accidents and damage to the insured vehicle. The move aims to help customers understand the protection offered under each component and the premium charged for it.
Under the new structure, motor insurance policies will be divided into four sections: third-party liability, legal liability towards occupants or pillion riders, personal accident cover, and own-damage cover for the insured vehicle.
The four sections will include:
• Third-party liability cover: This will remain compulsory under the Motor Vehicles Act and cover the vehicle owner's legal liability for injury, death or property damage caused to third parties in an accident.
• Legal liability towards occupants: This optional cover will protect passengers in cars and pillion riders on two-wheelers, including employees travelling in the insured vehicle. It will be available at an additional premium, and the number of occupants covered cannot exceed the vehicle's registered seating capacity.
• Personal accident cover: Personal accident insurance for the owner-insured will remain mandatory. Additional personal accident protection for other occupants, pillion riders and drivers other than the owner-driver can be opted for separately.
• Own-damage cover: This optional component will cover loss of or damage to the insured vehicle, allowing owners to decide whether they want protection for their own vehicle in addition to third-party insurance.
To ensure transparency, IRDAI has directed all general insurers to adopt standardised policy wordings and introduce a uniform customer option form for private cars and two-wheelers. Customers will have to indicate their preferred covers by completing the form, either online or offline. The completed form will become part of the insurance policy.
Insurance companies must also issue a Customer Information Sheet (CIS) at the time of purchase, clearly explaining the coverage under each section and separately disclosing the premium charged for every component. This will give policyholders a clear understanding of the protection they have selected and the additional covers they have declined.
The new framework will also benefit existing third-party policyholders. Those who wish to add legal liability cover for occupants or pillion riders can do so during the policy period by paying an additional premium, without cancelling their existing insurance policy. However, the additional cover must be obtained from the same insurer that issued the existing third-party policy. The coverage will come into effect from the date and time specified in the endorsement issued by the insurer.
While the policy structure and wording will be standardised, insurance companies will retain the flexibility to introduce additional coverage options and determine premiums for own-damage policies based on market conditions.
IRDAI has also directed insurers to integrate the new four-part motor insurance structure with Bima Sugam, the proposed digital insurance marketplace, so that the policies are available on the platform from December 15, 2026.
The new framework implements the Supreme Court's directions in the case of National Insurance Company Ltd vs Thungala Dhana Laxmi and Others, aimed at ensuring that vehicle owners have a clear understanding of the available insurance options and can make informed decisions while purchasing motor insurance.