Policies · BFSI
IRDAI has issued a circular creating four distinct sections for private car and two-wheeler policies, giving vehicle owners more choice over coverage and requiring insurers to disclose premiums separately for each section.
✦ AI SUMMARY 30-second read
- The framework, effective December 15, 2026, follows Supreme Court directions in National Insurance Company Ltd. versus Smt. Thungala Dhana Laxmi & Others.
- Policies will have four sections: third-party liability (mandatory), legal liability to occupants (optional), personal accident cover, and own damage cover (optional).
- Existing policyholders can add occupant or pillion-rider liability cover mid-term without cancelling their current third-party policy.
Why it matters: The rules compel insurers to price and display each coverage section separately, enabling vehicle owners to make more informed purchasing decisions.
This summary was generated by AI. Editors may review and update it.
Document details
| Document type | Rules & Regulation |
|---|---|
| Issued by | IRDAI |
| Region | India |
| Published | 5 November 2026 |
IRDAI has introduced a four-layer motor insurance framework for private cars and two-wheelers, applicable to all policies issued from December 15, 2026. The regulator announced the change through a circular dated November 2.
The framework follows directions issued by the Supreme Court in the National Insurance Company Ltd. versus Smt. Thungala Dhana Laxmi & Others case. Its stated objective is to give vehicle owners greater clarity about available insurance options and help them make informed purchasing decisions.
What the circular says
Motor insurance policies for private vehicles will be divided into four sections. Third-party liability remains mandatory, covering the owner's legal liability for injury, death or property damage caused to third parties.
Legal liability to occupants — covering passengers in cars, pillion riders on two-wheelers and specified employees of the insured — is optional. Personal accident cover for the owner-driver is mandatory, while additional accident protection for passengers, pillion riders and other drivers is optional. Own damage cover, which protects against loss of or damage to the insured vehicle, is also optional.
Insurers must clearly specify the coverage and premium for each section in the policy schedule and must provide a Customer Information Sheet and a customer option form. The option form will be available through both online and offline channels.
Who is affected
The rules apply to all private car and two-wheeler policyholders and the insurers that serve them. Existing policyholders who wish to add legal liability protection for occupants or pillion riders may do so during their current policy period by approaching the insurer that holds their third-party cover and paying the applicable additional premium.
The additional protection takes effect only from the date and time stated in the endorsement issued by the insurer. Policyholders are not required to cancel their existing third-party policy to obtain the new cover.
What happens next
IRDAI has directed insurers to integrate the revised framework with Bima Sugam from December 15, 2026. Insurers retain the ability to determine own damage premiums based on market conditions, provided the prescribed basic coverage is not restricted.
