Vehicle insurance rules will change from December 15, 2026, giving car and two-wheeler owners more flexibility to choose the protection they need.
Under the new framework introduced by the Insurance Regulatory and Development Authority of India (IRDAI), third-party insurance will remain compulsory, while several additional covers can be selected according to individual requirements.
The revised structure is designed to make insurance policies easier to understand and help customers see exactly what protection they are purchasing.
Insurers will also have to disclose the premium charged for each component instead of presenting all covers as one combined amount.
 What Changes Under the New Vehicle Insurance Rules?
The new vehicle insurance rules divide motor insurance into four separate components: third-party liability, legal liability towards occupants, personal accident cover, and protection against damage to the insured vehicle.
Third-party liability insurance will continue to be mandatory under motor vehicle law. It covers the vehicle owner’s legal responsibility for injury, death or property damage caused to another person in an accident.
The second component covers legal liability towards passengers travelling in a car or pillion riders on a two-wheeler.
This protection will be optional and can be selected by customers who want additional coverage for people travelling in their vehicles.
The third component is personal accident cover. The mandatory personal accident protection for the owner-insured will continue, while additional personal accident protection for occupants, pillion riders and other drivers can be chosen separately, subject to applicable rules.
The fourth component is own-damage cover, which protects the insured vehicle against loss or damage.
This cover will remain optional, allowing customers to decide whether they want protection for their own car or two-wheeler in addition to compulsory third-party insurance.
Customers Must Get a Clear Breakdown of Insurance Costs
A key part of the revised framework is greater transparency at the time of purchasing a policy. Insurers will have to provide customers with an option form to record the covers they wish to select.
The form will be applicable to policies purchased through both online and offline channels. Customers will be able to indicate their preferences rather than automatically accepting every additional cover included in a policy.
Insurance companies will also have to provide a Customer Information Sheet (CIS) explaining the protection offered under each component. The document must separately show the premium charged for the different sections.
This requirement is intended to help vehicle owners understand what they are paying for and make comparisons between available insurance options.
It should also reduce confusion about whether a particular passenger, driver or vehicle-related risk is covered.
 Existing Policyholders Can Add Passenger Cover
The new framework also provides an option for people who already have third-party motor insurance. They will be able to add legal liability protection for occupants or pillion riders during the existing policy period by paying an additional premium.
Customers will not need to cancel their current third-party policy to obtain this additional protection. However, the extra cover must be purchased from the insurer that issued the existing policy.
The additional protection will become effective from the date and time mentioned in the insurer’s endorsement. Policyholders should check the revised policy documents to understand when the added cover begins.
When Will the New Insurance Framework Start?
The four-part motor insurance structure will come into effect on December 15, 2026, for private cars and two-wheelers.
Insurers will have to follow standardised policy wording and provide the required customer documents under the revised framework.
The regulator has also directed insurers to integrate the new structure with Bima Sugam so that the policies can be made available through the proposed digital insurance marketplace from the same date.
Although the policy structure and wording will be standardised, insurers will retain flexibility in pricing own-damage cover according to market conditions.
They may also introduce additional coverage options, subject to regulatory requirements.
For vehicle owners, the biggest change is the ability to understand and select different parts of their insurance protection.
However, choosing fewer covers simply to reduce the premium could leave a driver or passengers without protection in situations where an optional benefit would have been useful.
Customers should therefore compare the coverage, exclusions and cost of each component before making a decision.
The new framework offers more choice, but selecting suitable protection will remain an important responsibility for every vehicle owner.
