What is IRDAI's new four-layer motor insurance structure?
Short answer
From 15 December 2026, every insurance policy for a private car or two-wheeler must be split into four clearly labelled sections: -third-party liability (TP), -damage to your own vehicle (OD). -liability to passengers or pillion riders, -personal accident cover, and Third-party cover and the owner's personal accident cover stay compulsory; you tick the other covers you want on an option form, and the policy must show the premium for each section separately.
- Applies to private cars and two-wheelers from 15 December 2026
- Only third-party cover and the owner's personal accident cover are compulsory.
- Passenger or pillion cover and own-damage cover become clear opt-in choices on a form.
- Your policy schedule must show the premium for each section separately.
Who is this article for?
Anyone who owns a private car, scooter or motorcycle, and anyone buying or renewing motor insurance from mid-December 2026. You don't need to do anything today, but the policy you get at your next purchase or renewal will look different.
What has IRDAI announced?
On 2 November 2026, the insurance regulator IRDAI issued a circular (IRDAI/CIR/MOT/10/2026) telling general insurers to use a new four-layer structure for private car and two-wheeler policies. It comes into force on 15 December 2026, and all policies issued from that date must follow it.
Insurers must also use standard policy wording for these covers, give every customer an option form and a Customer Information Sheet, and make the new policies available on Bima Sugam, IRDAI's online insurance platform, from the same date.
What are the four layers?
| Section | What it covers | Compulsory? |
|---|---|---|
| I. Third-party liability | Injury, death or property damage you cause to other people | Yes, by law |
| II. Liability to occupants or pillion riders | Your legal liability towards people travelling in your vehicle, including employees | No, you choose |
| III(i). Personal accident: owner | Accident cover for you, the owner | Yes |
| III(ii). Personal accident: others | Accident cover for passengers, a pillion rider, or a driver other than the owner | No, you choose |
| IV. Own damage | Loss of or damage to your own car or bike: accidents, theft, fire, floods and similar | No, you choose |
Add-ons such as zero depreciation or engine protection sit on top of own-damage cover, and insurers can continue to design and price them.
Why is this happening now?
It follows a Supreme Court judgment from August 2026 in National Insurance Co. Ltd. v. Thungala Dhana Laxmi & Others. In that case, an insurer denied a claim, arguing that its policy didn't cover the owner travelling as an occupant in his own vehicle. The Court ruled that a comprehensive policy does cover the vehicle's occupants, and directed a clearer four-layer structure so that owners understand exactly what they are buying.
Who is covered when someone inside the vehicle is hurt has caused disputes for years, especially for pillion riders on two-wheelers. The new structure makes that choice visible at the time of purchase.
What changes when I buy or renew?
You will get an option form. It lists the four layers, and you tick the optional covers you want, online or on paper. The completed form becomes part of your policy. You will get a Customer Information Sheet at the point of sale, summarising your cover. The premium for each section is shown separately in the policy schedule, so you can see what you are paying for passenger cover or own-damage cover. Wording becomes standard for the basic covers across insurers, which should make policies easier to compare. What stays the same? Third-party cover is still compulsory under the Motor Vehicles Act. Insurers still set their own prices for own-damage cover and add-ons. Your existing policy stays valid until it ends. Nothing needs to be cancelled.
Can I add passenger cover to my current policy?
Yes. According to the circular, you can add the occupant or pillion rider liability cover (Section II) during the policy term by paying an extra premium. It must be added by the insurer that issued your third-party cover, and it starts from the date and time on the endorsement. Your existing policy does not need to be cancelled.
What should I check at my next renewal?
Who usually travels with you? If you often carry family, colleagues or a pillion rider, look closely at Sections II and III(ii). Does someone else drive your vehicle? Personal accident cover for non-owner drivers is a separate, optional choice. Is own-damage cover still worth it for your vehicle's age and value? Compare the own-damage premium with the vehicle's insured value (IDV). Read the premium against each section and make sure what you ticked matches what you were charged. Want all your vehicle and family policies in one view?
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This is general information based on IRDAI's circular dated 2 November 2026, not advice to buy or change any policy. Check the circular and your insurer's documents for full details.
Questions people ask
Q1: When does the four-layer motor insurance structure start?
A: From 15 December 2026. All private car and two-wheeler policies issued from that date must follow it.
Q2: Is personal accident cover compulsory under the new structure?
A: Accident cover for the owner stays compulsory, as under existing rules. Accident cover for passengers, a pillion rider or another driver is optional
Q3: Do I need to cancel my current motor policy?
A: No. Existing policies continue until they end. You can add passenger or pillion liability cover mid-term from the insurer that issued your third-party cover.
Q4: Will motor insurance become more expensive?
A: The circular doesn't set prices. Third-party premiums are notified separately, and insurers still price own-damage cover and add-ons. What changes is that you see the premium for each section separately.
Sources
- IRDAI Circular IRDAI/CIR/MOT/10/2026, "Four Layer Structure – Motor Insurance Policy", 2 November 2026
- Supreme Court of India: National Insurance Co. Ltd. v. Smt. Thungala Dhana Laxmi & Ors., 2026 INSC 793 (4 August 2026)
Abhijit Pal, FIAI, FIA
Founder and actuarial reviewer
About 20 years as an actuary in life and health insurance and reinsurance
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