Four-Step Motor Policy Framework Becomes Compulsory for Owners

A major overhaul for motor insurance is underway as the IRDAI enforces a mandatory four-tier policy model for private vehicles and two-wheelers. The updated structure takes effect on December 15, 2026, and fundamentally reorganizes how coverage is packaged and sold.

The new system isolates four core components: third-party liability, legal liability for passengers, personal accident cover, and own damage protection. This segmentation is designed to prevent bundled confusion and highlight exactly what drivers are paying for.

Third-party liability insurance will continue to be legally compulsory. Personal accident rules for vehicle proprietors will also remain unchanged. All other coverage layers will be offered as flexible add-ons.

Regulatory compliance requires insurance firms to implement a uniform policy draft and a standardized customer choice form. Buyers will utilize this form through digital platforms or in-person visits to configure their desired protection levels.

To support informed decision-making, insurers must distribute a detailed information booklet during sales. This guide will explicitly map out coverage limits and premium costs for every individual tier.

Current policyholders can modify their existing plans by paying supplemental premiums to activate passenger legal liability. Meanwhile, insurers retain commercial freedom to launch fresh products and price own damage clauses according to economic trends.

The directive fulfills a Supreme Court order related to the National Insurance Company versus Thungala Dhana Lakshmi case. Additionally, full integration with the Bima Sugam digital ecosystem is mandatory, guaranteeing platform-wide rollout by the scheduled launch date.