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IRDAI sets four-layer motor insurance cover for private cars, two-wheelers

By CAShorts DeskPublished Source: The Hindu; IRDAI circular and standard motor policy wordings, 2 November 2026

IRDAI sets four-layer motor insurance cover for private cars, two-wheelers
Illustration (AI-generated)

The Insurance Regulatory and Development Authority of India (IRDAI) has ordered general insurers to sell private car and two-wheeler policies in a four-layer structure from 15 December 2026. Third-party liability and the owner's personal accident cover are compulsory. Liability to occupants, accident cover for passengers and own damage are optional, each priced separately in the policy.

Syllabus: GS3 · Indian Economy & Growth; GS2 · Statutory & Regulatory Bodies; GS2 · Governance & e-Governance

Why this matters for UPSC

GS3 economy: insurance regulation and IRDAI's role in consumer protection. Prelims can ask which motor covers are compulsory; Mains, standard products and informed choice.

Why it matters

A family buying a scooter today often signs for a bundle without knowing which part the law demands and which part is a sales choice. From mid-December the buyer will see each cover listed, ticked and priced on its own. A rider who already has accident insurance elsewhere can see what is being added; a car owner who carries colleagues can choose cover for them. Clear choices make it harder to sell cover a buyer did not want, and easier to spot a gap such as passengers left unprotected. The larger issue is consumer protection in a market where many buyers meet insurance first at a showroom counter.

Prelims pointers

  • Third-party motor cover pays for death of or injury to other people and damage to their property; own-damage cover pays for the insured's own vehicle.
  • Under the Motor Vehicles Act, 1988, third-party liability cover is the compulsory minimum for a motor vehicle; own-damage cover is not required by that Act.
  • A motor certificate of insurance is issued under the Central Motor Vehicles Rules, 1989, which are framed under the Motor Vehicles Act, 1988.
  • Occupant liability cover (Section II) excludes the owner and the insured's immediate family, meaning parents, spouse and children.
  • Mandatory personal accident cover is available only to an individual registered owner, not to a vehicle owned by a company or firm.

Practise a UPSC-style question

With reference to the four-layer motor insurance structure for private vehicles notified by IRDAI, consider the following statements:

1. Cover for legal liability to occupants of a private car is a mandatory layer of the policy.

2. Personal accident cover for an individual owner-insured is a mandatory part of the policy.

3. Insurers remain free to price own-damage cover in line with market forces.

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 2 and 3 only
  3. (c) 1 and 3 only
  4. (d) 1, 2 and 3
Show the answer

Answer: (b) 2 and 3 only

Answer: (b) 2 and 3 only. Liability to occupants is optional; owner accident cover is mandatory and own-damage pricing stays with insurers.

Statement 1: incorrect. IRDAI's circular lists legal liability to occupants or a pillion rider, Section II, as an optional cover bought for an extra premium.

Statement 2: correct. The owner-insured's personal accident cover under Section III is mandatory, alongside third-party liability under Section I.

Statement 3: correct. The circular lets insurers keep innovating and pricing own-damage cover according to market forces.

Eliminate: Statement 1 is false, since occupant liability is an optional add-on. Out: (a), (c), (d).

Trap: Wrong scope. Statement 1 moves an optional layer into the mandatory list, a swap that reads plausibly because both layers protect people in the car.

Remember: Compulsory layers are two: third-party liability and the owner's personal accident cover.

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