New motor insurance rules from December 15: Car, bike owners can choose 4 types of cover

Car and two-wheeler owners will soon have greater clarity and flexibility when purchasing motor insurance. The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a four-layer motor insurance framework for private vehicles, effective December 15, 2026, allowing policyholders to choose coverage based on their requirements.

The new framework, announced through a circular dated November 2, follows directions issued by the Supreme Court in the National Insurance Company Ltd. versus Smt. Thungala Dhana Laxmi & Others case.

The regulator said the objective is to provide greater clarity about available insurance options and help vehicle owners make informed purchasing decisions, according to a report by Mint.

What are the four insurance covers?

Under the revised framework, motor insurance policies will have four distinct sections:

1. Third-party liability (mandatory): Covers the vehicle owner's legal liability for injury, death or property damage caused to third parties in an accident. This insurance remains compulsory under motor vehicle laws.

2. Legal liability to occupants (optional): Provides protection against legal liabilities involving passengers travelling in cars, pillion riders on two-wheelers and specified employees of the insured.

3. Personal accident cover: Includes mandatory personal accident protection for the owner-driver, subject to applicable requirements. Additional accident coverage for passengers, pillion riders and other drivers remains optional.

4. Own damage cover (optional): Covers loss of or damage to the insured vehicle. Motorists can select this protection depending on their requirements.

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Can existing policyholders add coverage?

Yes. IRDAI has allowed existing policyholders to purchase additional legal liability protection for occupants or pillion riders during their policy period.

Customers must approach the insurer providing their third-party coverage and pay the applicable additional premium.

The additional protection becomes effective only from the date and time specified in the endorsement issued by the insurer.

Importantly, policyholders will not need to cancel their existing third-party insurance to obtain this cover.

Insurers must disclose premiums separately

Under the new rules, insurers must clearly specify the coverage and premium charged for each insurance section in the policy schedule.

They must also provide a Customer Information Sheet (CIS) and a customer option form, enabling buyers to select their preferred coverage.

The option form will be available for both online and offline purchases.

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When will the rules take effect?

The framework becomes applicable to private car and two-wheeler policies issued from December 15, 2026.

IRDAI has also directed insurers to integrate the revised structure with Bima Sugam from the implementation date.

Insurers can continue determining own damage premiums based on market conditions, provided the prescribed basic coverage is not restricted.