Car Insurance Splits Into 4 Parts From 15 Dec: What to Tick

Your car or bike insurance is about to look very different. From 15 December 2026, IRDAI is splitting every private car and two-wheeler policy into four separate parts — and for the first time, you will tick each cover yourself, with its price shown separately. The change comes from IRDAI circular IRDAI/CIR/MOT/10/2026, dated 2 November 2026, implementing a Supreme Court direction (National Insurance Company Ltd. vs Smt. Thungala Dhana Laxmi & Others, Civil Appeal No. 14369/2025). The court wanted owners to make informed choices instead of buying a bundle they did not understand. Quick Answer: From 15 December 2026, IRDAI splits your car or bike policy into four parts: third-party cover (compulsory), occupant liability (optional), personal accident cover (compulsory for the owner-driver at ₹15 lakh) and own-damage cover (optional). Insurers must show each cover's premium separately and give you an option form — so check what you are ticking before you renew.

Section I — Third-party liability (mandatory). This is the cover the law already requires. It pays for injury, death or property damage your vehicle causes to someone else. Nothing changes here: you cannot drive without it. Section II — Legal liability to occupants or pillion riders (optional). If a passenger in your car, or the pillion rider on your bike, is injured and claims against you, this cover responds. Most third-party-only policies leave this gap entirely uncovered today. Section III — Personal accident cover (partly mandatory). The owner-driver's personal accident cover stays compulsory at ₹15 lakh. Accident cover for occupants, the pillion rider and any other driver is optional. Section IV — Own-damage cover (optional). This pays for damage to your own vehicle — accident, theft, flood or fire. Bought with third-party cover, it is what makes a policy "comprehensive". It stays optional. The point of the split is transparency: insurers must issue a Customer Option Form and a Customer Information Sheet at the point of sale, with the premium for each cover shown separately. You will see what each layer costs before you tick it.

What actually changes on 15 December

All policies issued on or after 15 December 2026 must follow the new structure, with standard wordings — it applies to all general insurers except standalone health and specialised insurers. At renewal or purchase, you choose each layer rather than accepting a pre-set bundle. The structure must also be live on Bima Sugam — IRDAI's digital insurance marketplace — from the same date. What does not change: third-party cover stays compulsory, owner-driver accident cover stays at ₹15 lakh, and no insurer has published premium figures for the new layers. IRDAI has not said policies will get cheaper — and no one should promise that they will.

Already have third-party-only cover? You can add Section II mid-term

This is the most useful part of the circular for existing policyholders. If you hold a third-party-only policy, you can add the Section II occupant-liability cover during the policy period by paying an additional premium. You do not need to cancel the policy and buy a new one. There is one condition: you must buy the add-on from the same insurer that issued your existing policy. The extra cover starts from the date and time in the endorsement the insurer issues.

The trap to know before you tick: your family is excluded from Section II

Section II covers legal liability towards occupants — but it excludes the owner-insured and their immediate family: parents, spouse and children. And the number of occupants covered is capped at the vehicle's registered seating capacity. So if you drive your family in the car, Section II does not protect them as passengers — they need the optional personal accident cover under Section III. Ticking Section II thinking it covers your spouse or parents is the exact misunderstanding the new structure is meant to prevent.

Worked example: Priya, 29, Bengaluru

Priya owns a Honda Activa and a family hatchback. Both carry third-party-only cover today. That means: if her friend riding pillion is injured and claims against her, there is no cover. If her own car is damaged in an accident, there is no cover. Under the new structure, her renewal decision becomes a checklist, not a guess. First, keep Section I — it is compulsory. Second, add Section II for passengers who are not family: friends, colleagues, a hired driver. Third, add Section III accident cover for her husband and parents, since Section II excludes them. Fourth, decide on Section IV by vehicle value: worth having for a new car, often not for a 12-year-old bike. IRDAI has published no premium figures for these layers, so this article gives no rupee amounts. At renewal, the insurer must show each layer's premium separately — compare those lines, not the headline total.

Your renewal checklist

1. Check what you hold today: third-party-only, or third-party plus own-damage? 2. If third-party-only, ask your insurer about adding Section II mid-term — same insurer, extra premium, no cancellation needed. 3. List who actually rides with you. Family members need Section III accident cover, not Section II. 4. Check the seating-capacity cap: a 5-seater cannot cover six occupants. 5. Read the Customer Information Sheet before you sign — it must show each cover's premium separately. 6. From 15 December, compare the same four layers on Bima Sugam before you renew.

Educational content only — not financial advice. Consult a SEBI-registered investment adviser for personal guidance; investments are subject to market risk. IRDAI circular IRDAI/CIR/MOT/10/2026 dated 2 November 2026; The Economic Times, 4 November 2026; The Times of India, 4 November 2026; The Hindu, 3 November 2026; Business Standard, 4 November 2026.