Car and two-wheeler insurance moves to a four-layer policy with an option form from 15 December 2026
TaxByKK · Compliance News · taxbykk.com2 Nov 2026
In short
Following the Supreme Court's directions in National Insurance Company Ltd. v. Smt. Thungala Dhana Laxmi & others, IRDAI has issued uniform policy wordings for a four-layer motor insurance structure for private cars and two-wheelers. Third-party cover and the owner's personal accident cover are mandatory; liability to occupants or pillion riders, personal accident cover for occupants and own-damage cover are optional. Every buyer must fill an option form, and insurers must give a Customer Information Sheet at the point of sale. All policies issued from 15 December 2026 must follow the new structure.
- Authority
- Insurance Regulatory and Development Authority of India
- Circular
- IRDAI/CIR/MOT/10/2026 dated 2 November 2026
- Type
- Circular
- Applies to
- All general insurers (other than stand-alone health and specialised insurers); private cars and two-wheelers
- Effective from
- Policies issued on or after 15 December 2026
- Basis
- Supreme Court, CA No. 14369/2025; section 14(2) of the Insurance Act, 1938
What changed
| Item | Before | Now |
|---|---|---|
| Section I: liability to third parties | Part of the motor policy | Mandatory |
| Section II: legal liability to occupants or pillion rider, including the insured's employees | — | Optional; can also be added mid-term to an existing policy for extra premium, only from the insurer that issued the third-party policy |
| Section III: personal accident cover | — | Mandatory for an individual owner-insured; optional for occupants, pillion rider and drivers other than the owner |
| Section IV: own damage to the vehicle | — | Optional; insurers keep setting own-damage cover and pricing |
| Customer option form | — | Mandatory, ticked online or offline, and forms part of the policy |
| Customer Information Sheet | — | Mandatory at the point of sale |
The schedule must show the premium for each section separately. No existing third-party policy needs to be cancelled to take the extra covers. Under the standard wording, the owner's mandatory personal accident cover cannot be given where a company or firm owns the vehicle, and an owner with several vehicles needs it on only one. Insurers must also make these policies available on Bima Sugam from the same date. The circular does not fix premiums or sums insured.
Who it applies to
- Owners of private cars and two-wheelers buying or renewing motor insurance
- General insurers, motor insurance agents and brokers
- Fleet owners whose vehicles are registered as private cars
- Lawyers handling motor accident claims
What to do
- Vehicle owners: from 15 December 2026, read the option form and decide which optional sections you need, such as liability to passengers or pillion riders.
- Check that the policy schedule shows the premium for each section separately.
- If you already have a policy and want cover for liability to occupants, ask the insurer that issued your third-party cover for an endorsement.
- Insurers and intermediaries: adopt the uniform wordings, option form and Customer Information Sheet, and integrate with Bima Sugam by 15 December 2026.
Reference
IRDAI circular IRDAI/CIR/MOT/10/2026, 2 November 2026, Implementation of directions of the Supreme Court in CA No. 14369/2025, National Insurance Company Ltd. v. Smt. Thungala Dhana Laxmi & others: four-layer structure of motor insurance cover for private vehicles, option form and Customer Information Sheet; with annexure (standard policy wordings and customer option form).
Read the official PDF: IRDAI circular Read the official PDF: Annexure: policy wordings and option formWritten by TaxByKK from the official notification. Check the official text before you act on it.
Frequently asked questions
What are the four layers of the new motor policy?
Third-party liability, legal liability to occupants or pillion rider, personal accident cover, and own damage to the vehicle.
Which covers are mandatory?
Third-party liability, and personal accident cover for an individual owner-insured. The others are optional.
From when does it apply?
To all private car and two-wheeler policies issued from 15 December 2026.
Do I need to cancel my current policy?
No. IRDAI says no existing third-party policy needs to be cancelled to opt for the additional covers.