IRDAI has introduced a four-layer motor insurance structure for private cars and two-wheelers, separating mandatory and optional covers into four sections. The new structure takes effect from 15 December 2026, with each section having standardised wording and a separate premium in the policy schedule. Vehicle owners can select optional covers through a customer option form. IRDAI laid this out in circular IRDAI/CIR/MOT/10/2026, dated 2 November 2026.
Why was the four-layer structure introduced?
The four-layer motor insurance structure aims to make motor insurance coverage clearer and more transparent, particularly for vehicle occupants and cases where the owner-insured is travelling as a passenger.
It follows the Supreme Court's direction in National Insurance Company Ltd. v. Smt. Thungala Dhana Laxmi & Others (CA No. 14369/2025), dated 4 August 2026. The Court directed IRDAI to introduce a uniform four-layer policy structure and standardised wording for optional covers. The General Insurance Council developed the standardised wording in consultation with the industry. IRDAI issued the directions under Section 14(2) of the Insurance Act, 1938.
What are the four sections of the new motor insurance policy?
| Section | Cover | Status |
|---|---|---|
| I | Liability to third parties | Mandatory |
| II | Legal liability to occupant(s) or pillion rider, including employees of the insured | Optional |
| III (i) | Personal accident cover for the owner-insured | Mandatory |
| III (ii) | Personal accident cover for occupants or pillion rider, including any driver other than the owner-driver | Optional |
| IV | Loss of or damage to the insured vehicle | Optional |
Section I: Liability to third parties
This is the base of the policy. It covers the owner’s liability to people outside the vehicle. Every private car and two-wheeler must carry it.
Section II: Legal liability to occupants or pillion rider
This cover pays for the owner's legal liability if a passenger in their car or a pillion rider on their bike is injured. It also covers eligible employees and is optional, unlike third-party insurance, which is mandatory.
Section III (i): Personal accident cover for the owner-insured
The personal accident cover is for the owner of the insurance policy and is a mandatory cover.
Section III (ii): Personal accident cover for occupants or pillion rider
This optional cover provides personal accident protection to passengers in a car, pillion riders on a two-wheeler and drivers other than the owner-driver. Unlike Section II, which covers the owner's legal liability towards these individuals, Section III (ii) provides personal accident cover to them.
Section IV: Loss of or damage to the vehicle
This optional own damage cover pays for loss of or damage to the insured vehicle. Insurers can set their own premiums for this cover based on their pricing approach.
What Are the Documentation Changes Under the New Motor Insurance Rules?
Under IRDAI's new circular, insurers must provide a customer option form and a Customer Information Sheet at the time of sale. The policy schedule must also show the covers selected and the premium charged for each section, while the certificate of insurance must follow the prescribed format under the CMV Rules, 1989.
Customer Option Form
The customer option form is a document that records the covers a vehicle owner chooses under the new four-layer motor insurance structure. It helps customers select the optional covers they need and understand which covers are included in their policy. Every buyer must complete this form, either online or on paper. Insurers must collect it for every policy in this category, and the completed form becomes part of the policy.
Customer Information Sheet (CIS)
The Customer Information Sheet (CIS) is a document that summarises the key details of an insurance policy in simple language. It helps policyholders understand the policy’s coverage, benefits and important conditions before buying it. Under the new IRDAI rules, insurers must provide the CIS at the time of sale for every private car and two-wheeler policy.
Policy Schedule and Certificate of Insurance
The policy schedule must list the covers offered and the premium charged for each section, allowing customers to see what each cover costs.
The certificate of insurance must follow the CMV Rules, 1989. The Policy and the Schedule are read together, and a word defined in either has the same meaning wherever it appears.
Can existing policyholders add legal liability cover for occupants?
Yes, existing policyholders can add Section II legal liability cover for occupants or pillion riders during the policy period. The conditions are:
An additional premium is payable.
Cover starts from the date and time mentioned in the endorsement.
It can only be bought from the insurer that issued the Third Party policy.
Neither the insurer nor the insured needs to cancel the existing Motor Third Party policy.
Only Section II is mentioned for running policies. The circular does not specify whether Section III (ii) or Section IV can be added mid-term.
Can insurers still set own damage prices and exclusions?
Yes. Insurers can keep innovating on coverage and pricing own damage cover according to the market. They can add or delete general exclusions and conditions based on the cover opted for, as long as they do not restrict the basic coverage under the four sections.
When will the four-layer structure for motor insurance be implemented?
The structure, the standard wording, and the option form apply from 15 December 2026 to every policy issued on or after that date. Insurers must also integrate the structure with Bima Sugam by the same date, so the new policies are available there from day one.
What the Four-Layer Structure for Motor Insurance Does Not Address
Premium amounts: No premium figures or personal accident compensation amounts are given.
Exact policy wording: Since it is a circular and will be implemented from 15th December 2026, the exact policy wording the insurer will adopt may change as per the instructions from IRDAI.
Longer third-party terms: The Supreme Court also directed IRDAI to raise the mandatory third-party insurance period for new private cars from three to four years and for new two-wheelers from five to six years. This was a separate direction, not included in the four-layer structure, which is yet to be implemented.
Frequently Asked Questions
What is the new four-layer motor insurance structure by IRDAI?
IRDAI has divided private car and two-wheeler insurance into four sections covering third-party liability, occupant liability, personal accident and vehicle damage. Third-party liability and owner personal accident cover are mandatory, while the remaining covers are optional. Each section has a separate premium in the policy schedule. The new structure applies from 15 December 2026.
Is own damage insurance mandatory under the new IRDAI rules?
No. Own damage cover is optional. Third-party liability and owner personal accident cover remain mandatory.
Can I choose which covers to buy under the new motor insurance rules?
Yes. Policyholders can select optional covers through a customer option form, while mandatory covers remain part of the policy.
When will the new four-layer motor insurance rules come into effect?
The new IRDAI motor insurance structure will apply to two-wheeler and private car insurance policies issued from 15 December 2026.
