IRDAI Orders Four-Layer Motor Policies From December 15

India's insurance regulator has told general insurers to restructure motor insurance for private cars and two-wheelers into four clearly separated layers. The change, reported on November 4 and due to start on December 15, 2026, is meant to give buyers more choice and more transparency about what they are paying for. This article summarises what has been reported by Angel One and by the news agency IANS, explains each layer in plain language, and notes what has not been published. It is a summary of public reporting, not legal or financial advice, and readers should check the regulator's circular and their insurer's documents before making decisions.

What the regulator has ordered

According to the reports, the Insurance Regulatory and Development Authority of India, known as IRDAI, directed general insurers to introduce a four-layer structure for motor insurance policies covering private cars and two-wheelers from December 15, 2026. Alongside the structure, insurers must use standardised policy wording for these vehicles, a uniform customer option form to record which covers the buyer chooses, and a Customer Information Sheet that lists each section of cover and its premium. Insurers must also complete integration with the Bima Sugam platform, the industry's online marketplace, so that the products are available there by the same date.

The reports say the regulator described the framework as aimed at improving customer choice and transparency by separating the components of a motor policy. They also say the circular was issued to comply with a Supreme Court order in the case of National Insurance Company Limited versus Thungala Dhana Laxmi and others. The sources reviewed do not explain the court's reasoning, so this article does not describe the case beyond its name.

The four layers

The first layer is third-party liability. It is compulsory under India's Motor Vehicles Act and covers the owner's legal liability for injury or death of another person, or damage to another person's property, caused by the insured vehicle. Without it, a vehicle cannot legally be driven on public roads.

The second layer is legal liability to occupants or pillion riders. It is optional. It covers passengers in a private car, pillion riders on a two-wheeler, and employees travelling in the insured vehicle, and the number of people covered cannot exceed the registered seating capacity. According to Angel One, it does not cover the owner-insured or immediate family, meaning parents, spouse and children.

The third layer is personal accident cover. Angel One reports that it is mandatory for the owner-insured, which fits the existing rule on compulsory personal accident cover for owner-drivers, and cover for other occupants, pillion riders or drivers other than the owner-driver can be bought separately. IANS describes the last three layers as optional, subject to the existing rules on compulsory personal accident cover. The reports differ slightly in wording, so readers should check the circular itself for the exact rule.

The fourth layer is own-damage cover, which pays for loss of or damage to the insured vehicle itself, such as after an accident, fire or theft depending on the policy terms. It is optional.

What changes for buyers

The most visible change is transparency. Each layer's premium must be shown separately, so a buyer can see how much the compulsory third-party part costs and how much each optional part adds. Until now, many buyers saw a single total. The new option form means the buyer's choices are recorded for every policy, and the Customer Information Sheet, available online and offline, must explain each component. The sources say the sheet must be provided at the time of sale.

Existing customers also get a new option. A person who holds a third-party-only policy can add liability cover for occupants or pillion riders during the policy term by paying an additional premium, without cancelling the existing policy. The sources do not say what that premium will be.

What does not change

Insurers will still be able to design new products and set the price of own-damage cover and additional covers, based on market conditions, even though the structure and wording are standardised. The reports do not say whether total premiums will rise or fall, and they give no figures, so any claim about price effects is unsupported. Competition between insurers, claims experience and the cost of repairs will continue to influence own-damage prices.

How to use the new structure

Buyers can prepare in a few practical ways. First, decide whether an own-damage layer is needed. For a new or financed vehicle, it is usually worth having, because it pays for the car or bike itself, while for an older vehicle some owners weigh the cost against the vehicle's value. Second, think about passengers. If the vehicle regularly carries family members, friends or colleagues, the occupant liability layer is a layer to ask about, keeping in mind that, according to the report, it excludes the owner and immediate family. Third, read the option form and the information sheet before signing, and keep copies. Fourth, ask the insurer how the premium for each layer is calculated, and compare quotes on a layer-by-layer basis, since standardised wording makes comparison easier.

What it means for insurers and agents

For insurers, the change means new documents, new systems and training for sales teams, with a deadline of December 15. Integration with Bima Sugam adds a further task. Agents and online platforms will need to explain the four layers clearly. Some may see lower revenue on optional covers if customers choose fewer layers, while others may see more interest in the add-on for passengers. The sources do not report industry reaction.

What to watch next

Watch for IRDAI's published circular, for insurers' updated policy wording and forms before December 15, for any clarification on the rule for owner personal accident cover, and for the first premium comparisons once the new structure is live. The regulator publishes its circulars on its website. This article summarises public reporting and is not legal or financial advice.