Motor insurance is set for a major overhaul as the Insurance Regulatory and Development Authority of India (IRDAI) prepares to introduce a new four-tier policy structure. The changes are scheduled to take effect from Dec. 15, 2026, with the revised policies also expected to be accessible through the Bima Sugam platform.
The regulator's move is aimed at making vehicle insurance products more transparent and bringing greater uniformity to the market.
The changes could make policy renewals more detailed, requiring vehicle owners to pay closer attention to the terms and components of their cover. Rather than focusing solely on the premium amount, motorists should assess five important aspects before renewing their car or two-wheeler insurance.
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1. Differentiate Between Mandatory and Optional Covers
The new structure separates motor insurance into four categories: third-party liability, legal cover for passengers travelling in the vehicle, personal accident insurance and protection against damage to the insured vehicle.
While third-party insurance and personal accident cover for the owner-driver continue to be mandatory, motorists can decide whether they want to purchase own-damage and occupant liability cover.
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2. Check Passenger and Pillion Rider Protection
One of the notable changes is the introduction of an optional legal liability cover for passengers travelling in cars and pillion riders on two-wheelers. The protection comes with certain restrictions.
It does not extend to the vehicle owner, the insured person or their immediate family members, including a spouse, parents and children. The number of passengers covered must also remain within the seating capacity specified in the vehicle's registration certificate.
3. Evaluate Additional Personal Accident Insurance
Personal accident insurance for the owner-insured remains a compulsory part of motor cover. Those seeking wider protection can purchase additional accident cover for other people who drive the vehicle, car passengers and pillion riders.
Insurance experts recommend assessing who regularly travels in the vehicle and whether they have adequate financial protection before deciding on these optional benefits. The choice should be guided by actual requirements rather than the additional premium alone.
4. Reassess Own-Damage Cover, IDV, and Deductibles
Although own-damage cover is not compulsory, it can help vehicle owners manage the financial consequences of accidents and theft. The decision to buy this protection should depend on factors such as the vehicle's age, prevailing market price and repair costs.
Policyholders should also examine the IDV, as it sets the maximum insured value considered for compensation in the event of theft or total loss. The deductible is equally important, since it determines how much of a claim must be borne by the owner.
5. Examine Component-Wise Premiums and Documentation
Insurance companies will have to provide customers with a clear account of the premium charged for every individual section of a motor insurance policy.
Policyholders will also be given a Customer Information Sheet (CIS) explaining the coverage details, along with a Customer Option Form to formally record their preferred insurance components.
The revised rules also offer greater flexibility to existing customers. Those wishing to add legal liability protection for occupants or pillion riders during the policy period can do so by paying an additional premium to their existing insurer. There will be no requirement to terminate their current third-party insurance policy.
With the new framework approaching, vehicle owners should examine the finer details of their insurance contracts and assess whether their chosen protection is adequate to meet potential financial risks.
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