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How to Transfer Your Insurance Before Selling the Second-hand Car

By Vikas Chandra Das
28 July 2022, 10:00 PM
transfer your insurance before selling used car

Did you know that the used car market in India is 1.3 times that of the new car market? With the rapid growth in the organised and unorganised sectors in India, the demand for second-hand cars is on the rise. So, how does this benefit you?

Well, instead of sending your car to the junkyard when you’re planning to purchase a new one, you can always sell it to an eager buyer. This translates to an inflow of cash, that you can then invest in a suitable avenue. Now, if this sounds like something you’ll do, make sure you transfer your insurance before selling the car!

Here’s everything you need to know about transferring your insurance before selling a second-hand car!

What does Car Insurance Transfer Mean?

As the name implies, car insurance transfer is the process of transferring the ownership of the insurance policy to the new buyer of your car. The process is rather straightforward and can be carried out online, or with the help of an insurance agent.

Why is it Important for the Seller to Transfer the Car Insurance to the New Owner of the Car?

Not transferring your car insurance policy to the new owner can result in legal action against both you and the new owner. It’s always better to safeguard yourself against such avoidable hassles by following the due procedure.

There are, of course, more benefits for the new owner. For starters, they do not have to purchase a brand-new car insurance policy. Instead, they can just use the one existing for the car. Moreover, according to the Insurance Regulatory and Development Authority of India (IRDA), the insurance documents and the car registration documents should have the same name when filing for a car insurance claim. If this is not the case, it may be quite challenging for the new owner to receive a claim pay-out post an accident.

In fact, it’s important to note that courts have sided with insurance companies in such cases in the past.

How can you Transfer the Insurance Policy to the New Owner?

Here’s some good news – transferring the ownership for the car and the insurance can both be taken care of at the same time. So, if you were wary of additional chores piling up on your plate, don’t be! 

The following steps illustrate how you can transfer the insurance policy:

1. Inform the insurance company

Start by informing the insurance company that you have sold your car, and ask them to send you the No-Claims Bonus retention certificate. As the NCB is awarded to the owner of the car, and not the car itself, you can still avail the benefits of the same once you get your new car and insurance.

Depending on the insurance provider, the following documents will be required:

  • A letter requesting the cancellation of the policy due to the sale of the car
  • Original policy document
  • Form 29 (which can be downloaded from the RTO website)
  • Form 30 (which can be downloaded from the RTO website)
  • Copy of the RC book showing the new owner’s name
  • Proof that the buyer received the car

2.      Submit the required documents

The buyer needs to show the insurance company the following documents:

  • Copy of form 29 or the RC book showing the new owner’s name
  • Signed copy of the No Objection Clause (NOC) from the old owner
  • New application form
  • A verified inspection report filled out by the car insurance company
  • The difference in premium amounts - If the old owner benefited from NCBs, then the new policyholder must procure the difference in amount
  • Address proof (such as your rent agreement or electricity bill)
  • Passport size photographs

Important Points Regarding Transferring the Insurance Policy to the New Owner

  • You must transfer the policy within 14 days of selling the car
  • If you have purchased a second-hand car, do not drive it until the insurance policy has been transferred. This is because if your car is damaged during an accident, you will not receive a claim pay-out, even if you’ve initiated the policy transfer. Once the policy is in your name and active, you can drive the car.
  • The third-party cover is automatically transferred to the new policyholder. Do keep in mind that this only applies if you transfer the policy within the stipulated 14 days.
  • Note that even after the policy is transferred, you will not gain Own Damage cover. You can speak to the insurance provider regarding add-ons that may benefit you.
  • Finally, if the sale of the car has occurred between two parties from different states, you may require a Clearance Certificate from the RTO as well.

Always remember that as per the law, the onus of transferring the car insurance policy is now on the seller. Make sure you do so along with transferring the car’s registration to avoid any legal hassles in the future!

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