Buying Or Renewing Car Insurance? New Four-Tier Policy Structure Could Change How You Choose Your Cover
Motor insurance in India is preparing for a significant change, with the Insurance Regulatory and Development Authority of India (IRDAI) introducing a revised four-category policy structure from December 15, 2026. The updated products are also expected to be available through the Bima Sugam platform.
For vehicle owners, the new framework means taking a closer look at what their insurance actually covers. Premiums will remain important, but understanding individual benefits, exclusions and financial responsibilities will be equally essential when choosing or renewing a policy.
Third-party insurance remains a legal requirement for vehicles on Indian roads. Personal accident cover for the owner-driver is also compulsory, subject to the applicable regulatory provisions and exemptions.
However, vehicle owners will have greater flexibility when selecting certain additional benefits. Own-damage insurance and legal liability protection for occupants can be purchased according to individual requirements.
This distinction matters because not every motorist needs an identical combination of benefits. Someone with an older vehicle, for instance, may assess own-damage protection differently from someone who has recently purchased a new car.
Before renewing, policyholders should identify which components are legally required and which ones they can choose voluntarily. This will help them understand what they are paying for rather than selecting a policy simply because its overall premium appears attractive.
Although this additional protection could be useful, vehicle owners should understand its limitations before purchasing it. The cover does not automatically extend to everyone travelling with the policyholder.
The vehicle owner, insured person and their immediate family members, including a spouse, parents and children, are excluded from this particular legal liability protection under the specified provisions.
Another important condition concerns the number of people covered. Insurance protection cannot exceed the seating capacity recorded in the vehicle's registration certificate.
For example, a car registered to carry five people cannot be insured under this provision for a greater number of occupants. Similarly, two-wheeler owners should examine the conditions applicable to pillion rider protection.
Motorists should therefore read the policy wording carefully and establish precisely who qualifies for this benefit. Assuming that every passenger is automatically covered could lead to confusion when making a claim.
The revised framework allows additional personal accident protection to be considered for other drivers, car occupants and pillion riders, subject to the applicable policy conditions.
This option may be worth examining for families who regularly travel together or households where more than one person uses the same vehicle.
For instance, a car owner whose spouse or another family member frequently drives the vehicle may want to assess whether additional accident protection is appropriate. Similarly, someone who regularly carries passengers could examine the available options.
According to insurance experts, the decision should be based on the individual's existing insurance arrangements, travel habits and financial responsibilities.
It is also important to distinguish between personal accident benefits and legal liability cover. They serve different purposes and should not be treated as interchangeable forms of protection.
Before purchasing additional benefits, policyholders should check the insured persons, eligible circumstances, exclusions and compensation limits. Paying a higher premium does not necessarily mean receiving protection that matches every personal requirement.
This is where own-damage insurance becomes relevant. Although it is not compulsory under the revised structure, it can provide financial assistance if the insured vehicle is damaged in an accident, subject to the policy's terms and exclusions. Comprehensive policies generally combine third-party and own-damage protection.
The usefulness of this cover depends on several factors, including the vehicle's age, condition, market value and potential repair expenses.
A particularly important figure to examine is the Insured Declared Value (IDV). It represents the insurer's declared value of the vehicle for insurance purposes and is generally used as the basis for compensation in cases of theft or total loss, subject to policy conditions.
Vehicle owners should avoid selecting an IDV without understanding its financial implications. A suitable value should reasonably reflect the vehicle's applicable market value and depreciation.
Deductibles also deserve attention. This is the portion of an admissible claim that the policyholder must pay from their own pocket.
A higher voluntary deductible may reduce the premium, but it also increases the amount the owner must contribute when making a claim. Motorists should consider whether they can comfortably afford that expense before agreeing to it.
Insurers will be required to disclose the premium charged for individual components of a policy rather than presenting customers with only an overall amount.
This breakdown should make it easier to understand how much is being paid for third-party liability, personal accident protection, own-damage insurance and other selected benefits.
Two important documents will also help customers make more informed decisions.
The first is the Customer Information Sheet (CIS), which explains the policy's coverage and important conditions. The second is the Customer Option Form, which records the insurance components selected by the policyholder.
Both documents deserve careful attention. Customers should check whether the selected benefits match their requirements and whether any exclusions or restrictions could affect a future claim.
The new arrangement is also expected to offer flexibility to existing policyholders. Customers who want to add legal liability protection for car occupants or pillion riders during an ongoing policy period can approach their existing insurer and pay the applicable additional premium.
Importantly, they will not have to cancel their existing third-party insurance policy simply to add this protection.
Checking compulsory and optional covers, understanding passenger protection, evaluating personal accident benefits and examining IDV and deductibles can help avoid unpleasant surprises during a claim.
The availability of clearer premium disclosures and standardised customer documents should also make it easier to compare different components of insurance.
Ultimately, the right motor insurance policy is not necessarily the cheapest one. Vehicle owners should look for a combination of protection that reflects their vehicle's value, usage patterns and ability to manage unexpected expenses.
Disclaimer: This article is intended for informational purposes only and should not be considered financial or insurance advice. Readers should review the applicable policy terms and consult a qualified insurance professional before making decisions.
For vehicle owners, the new framework means taking a closer look at what their insurance actually covers. Premiums will remain important, but understanding individual benefits, exclusions and financial responsibilities will be equally essential when choosing or renewing a policy.
1. Understand Which Insurance Covers Are Compulsory
One of the most important things to understand under the revised framework is the distinction between compulsory insurance and additional protection. The new structure divides motor insurance into four broad components: third-party liability, legal liability towards occupants, personal accident insurance and own-damage protection.Third-party insurance remains a legal requirement for vehicles on Indian roads. Personal accident cover for the owner-driver is also compulsory, subject to the applicable regulatory provisions and exemptions.
However, vehicle owners will have greater flexibility when selecting certain additional benefits. Own-damage insurance and legal liability protection for occupants can be purchased according to individual requirements.
This distinction matters because not every motorist needs an identical combination of benefits. Someone with an older vehicle, for instance, may assess own-damage protection differently from someone who has recently purchased a new car.
Before renewing, policyholders should identify which components are legally required and which ones they can choose voluntarily. This will help them understand what they are paying for rather than selecting a policy simply because its overall premium appears attractive.
2. Check What Passenger And Pillion Rider Insurance Covers
The revised arrangement also provides an optional provision for legal liability towards people travelling in an insured vehicle. This includes passengers in private cars and pillion riders on two-wheelers.Although this additional protection could be useful, vehicle owners should understand its limitations before purchasing it. The cover does not automatically extend to everyone travelling with the policyholder.
The vehicle owner, insured person and their immediate family members, including a spouse, parents and children, are excluded from this particular legal liability protection under the specified provisions.
Another important condition concerns the number of people covered. Insurance protection cannot exceed the seating capacity recorded in the vehicle's registration certificate.
For example, a car registered to carry five people cannot be insured under this provision for a greater number of occupants. Similarly, two-wheeler owners should examine the conditions applicable to pillion rider protection.
Motorists should therefore read the policy wording carefully and establish precisely who qualifies for this benefit. Assuming that every passenger is automatically covered could lead to confusion when making a claim.
3. Consider Additional Personal Accident Protection
Compulsory personal accident insurance for the owner-driver provides an important layer of financial protection. However, motorists may also consider extending accident-related benefits to other people associated with the vehicle.The revised framework allows additional personal accident protection to be considered for other drivers, car occupants and pillion riders, subject to the applicable policy conditions.
This option may be worth examining for families who regularly travel together or households where more than one person uses the same vehicle.
For instance, a car owner whose spouse or another family member frequently drives the vehicle may want to assess whether additional accident protection is appropriate. Similarly, someone who regularly carries passengers could examine the available options.
According to insurance experts, the decision should be based on the individual's existing insurance arrangements, travel habits and financial responsibilities.
It is also important to distinguish between personal accident benefits and legal liability cover. They serve different purposes and should not be treated as interchangeable forms of protection.
Before purchasing additional benefits, policyholders should check the insured persons, eligible circumstances, exclusions and compensation limits. Paying a higher premium does not necessarily mean receiving protection that matches every personal requirement.
4. Review Own-Damage Cover, IDV And Deductibles
Third-party insurance provides protection against specified liabilities arising from injury, death or property damage involving another party. However, it does not pay for damage to the policyholder's own vehicle.This is where own-damage insurance becomes relevant. Although it is not compulsory under the revised structure, it can provide financial assistance if the insured vehicle is damaged in an accident, subject to the policy's terms and exclusions. Comprehensive policies generally combine third-party and own-damage protection.
The usefulness of this cover depends on several factors, including the vehicle's age, condition, market value and potential repair expenses.
A particularly important figure to examine is the Insured Declared Value (IDV). It represents the insurer's declared value of the vehicle for insurance purposes and is generally used as the basis for compensation in cases of theft or total loss, subject to policy conditions.
Vehicle owners should avoid selecting an IDV without understanding its financial implications. A suitable value should reasonably reflect the vehicle's applicable market value and depreciation.
Deductibles also deserve attention. This is the portion of an admissible claim that the policyholder must pay from their own pocket.
A higher voluntary deductible may reduce the premium, but it also increases the amount the owner must contribute when making a claim. Motorists should consider whether they can comfortably afford that expense before agreeing to it.
5. Examine Premium Breakdowns And Customer Documents
Another significant feature of the revised framework is greater clarity in how motor insurance premiums are presented to customers.Insurers will be required to disclose the premium charged for individual components of a policy rather than presenting customers with only an overall amount.
This breakdown should make it easier to understand how much is being paid for third-party liability, personal accident protection, own-damage insurance and other selected benefits.
Two important documents will also help customers make more informed decisions.
The first is the Customer Information Sheet (CIS), which explains the policy's coverage and important conditions. The second is the Customer Option Form, which records the insurance components selected by the policyholder.
Both documents deserve careful attention. Customers should check whether the selected benefits match their requirements and whether any exclusions or restrictions could affect a future claim.
The new arrangement is also expected to offer flexibility to existing policyholders. Customers who want to add legal liability protection for car occupants or pillion riders during an ongoing policy period can approach their existing insurer and pay the applicable additional premium.
Importantly, they will not have to cancel their existing third-party insurance policy simply to add this protection.
What Vehicle Owners Should Do Before December 2026
With the revised framework scheduled to begin on December 15, 2026, motorists should make a habit of reviewing their insurance requirements rather than automatically renewing the same combination of benefits every year.Checking compulsory and optional covers, understanding passenger protection, evaluating personal accident benefits and examining IDV and deductibles can help avoid unpleasant surprises during a claim.
The availability of clearer premium disclosures and standardised customer documents should also make it easier to compare different components of insurance.
Ultimately, the right motor insurance policy is not necessarily the cheapest one. Vehicle owners should look for a combination of protection that reflects their vehicle's value, usage patterns and ability to manage unexpected expenses.
Disclaimer: This article is intended for informational purposes only and should not be considered financial or insurance advice. Readers should review the applicable policy terms and consult a qualified insurance professional before making decisions.
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