As part of its August 4 ruling on motor insurance compliance, the Supreme Court approved a four-layer policy structure for private vehicles designed to bring clarity to consumers. The first layer is the mandatory third-party-only policy required under Section 146 of the Motor Vehicles Act, 1988, whose pricing will be fixed through a consultative process between IRDAI and the Central Government.
The remaining three layers are optional add-ons priced by individual insurers: Layer II provides legal liability cover for occupants and pillion riders (other than owner, driver and family); Layer III provides personal accident cover — death and permanent disability — for the owner, driver and all occupants; and Layer IV is own damage cover for loss or damage to the insured vehicle itself.
The court directed that every motor insurance customer, whether buying online or offline, must receive a standardised Customer Option Form with a checkbox-based system, so buyers can choose additional covers transparently. Insurers must also provide a consumer-friendly information sheet explaining who is covered under mandatory and optional covers, and IRDAI was asked to formulate uniform policy wordings for the optional layers.
The court noted IRDAI's input that this structure would help vehicle owners make informed choices rather than defaulting to whatever an agent offers at the point of sale.
Sources: The Hindu, Economic Times, Lawcutor (August 4, 2026)