Having a car is not just a matter of status anymore. In fact, looking at the condition of public transportation these days, most people prefer to have a safe ride to and from their workplace. If statistics are to be believed, the volume of second-hand car sales rose to a record high of 4 million in 2018. When compared to new car sales, this figure is almost twice as high.
If like most people you imagine car ownership is getting the car keys, you are in for a surprise! When it comes to the paperwork of car ownership, you need to consider everything - including the transfer of your car insurance policy. So, let’s understand this process in depth -
What is Car Insurance Policy Transfer?
As the name suggests, this is the process of reassigning a car insurance policy from the existing owner to someone else. This is mandatory at the time of both purchasing as well as selling a car. In simple terms, it is a legal agreement that withdraws the ownership from the seller and transfers it to the buyer. According to the Motor Vehicles Act, it is compulsory for both parties (seller as well as the buyer) to transfer the car insurance policy within 14 days from the purchase date.
Why is Car Insurance Policy Transfer Important?
As per the guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI), the name and address mentioned on the registration certificate should match that of the insurance policy of a car. This indicates that if the insurance policy is not in your name, you cannot file a claim against the existing car insurance policy even if you are legally the owner of the car. Since it is a legal contract, owner names and addresses play an important role in claims settlement. Therefore, at the time of purchasing, make sure the existing car insurance policy is duly transferred in your name.
Scenarios When Car Insurance Policy Transfer is Necessary?
Scenario 1 - Purchasing a second-hand car
If you have managed to gather enough funds to purchase a second-hand car, talk to the owner about vehicle ownership and insurance transfer. Before buying, you can ask the seller about the mileage and kilometers it has run. Once you have negotiated the price, you can apply for the transfer of the registration certificate in your name. This process usually takes up to a month following which you can apply for a car insurance policy transfer.
Scenario 2 - Selling your car
Imagine you have decided to sell your 3-year-old car. The car you are selling has an active insurance plan valid for another year. Once you have found a suitable buyer, you will have to transfer the car’s registration certificate accordingly. It is not uncommon for buyers to assume that the policy transfer happens automatically. Unfortunately, that is not the case. In order to transfer the legal responsibility from one owner to the other, car insurance companies need to be notified separately. It is the responsibility of both the buyer as well as the seller to transfer the insurance policy as soon as possible after the second-hand car transaction is successful. Depending on the verification of documents submitted, the car insurance policy transfer may take up to 30 working days.
Scenario 3 - Your car which was on loan is stolen
Imagine you have a car on loan which unfortunately gets stolen. You carry out the due process of filing the FIR, informing the RTO and insurance provider, and even submit all the necessary documents. Despite all the efforts, if your car cannot be found, the legal ownership of the car will not be transferred to the insurance provider unless all your loan EMIs are paid to the bank. Once all your EMIs are paid, the bank will provide you with a NOC, post which you are eligible to file a theft claim.
What is the Process for Car Insurance Policy Transfer?
In order to transfer your car insurance, you will need to pay a transfer fee along with the following documents-
- Application form
- Form 30
- Form 29
- NOC from the owner
- An inspection report from the insurance provider
- New registration certificate (RC)
PRO-TIP: In case your Regional Transport Office (RTO) is delaying your ownership transfer due in the registration certificate, you can apply for a car insurance transfer with the other documents.
However, it is important to note that your insurance company will reject your claim in the absence of a copy of the new registration certificate. Therefore, remember to submit the new RC to your insurance provider as soon as it is provided to you.
Additional Documents Required for Car Sale?
Apart from the mandatory car insurance transfer, you will also need to update other documents with respect to your car sale. The main document is the new Registration Certificate or RC which legally transfers the ownership of the car to you. As a buyer, you will also need the below documents from the car seller:
- Original invoice of the car
- No Objection Certificate (NOC) from the car financier
- Road tax receipts
Both the buyer and seller must sign Form 29 and 30 to make the transaction effective.
Wait, What About No Claim Bonus?
No Claim Bonus (NCB) is a percentage discount offered by your insurance provider for being a responsible driver. You can avail of a discount of 20% on your own-damage premium at the time of renewal if you have not filed for a claim during the first year of your policy term. No Claim Bonus (NCB) is associated with the driver and not the vehicle. Therefore, you can transfer your NCB at the time of transferring vehicle ownership.
The percentage discount based on the claim-free years is mentioned in the table below -
| No of zero claims years | No-Claim Bonus (in %) |
|---|---|
| 1 | 20 |
| 2 | 25 |
| 3 | 35 |
| 4 | 45 |
| 5 | 50 |
Summary:
According to the law in India, it is a criminal offence to drive on the road without valid motor insurance. Therefore, buyers, as well as the sellers, need to transfer the ownership of their car insurance plan along with that of the car. The process is not complicated but may require up to 30 working days. Therefore, it is advised to start both the car and car insurance ownership transfer process simultaneously and make sure to complete it within 14 days of selling your car.
