If you are planning to buy a second-hand car, then you are not only one in this league. Purchasing a used car is becoming a favorite choice for many in order to save and money. Insurance plays a major role in buying or selling a used car. Both seller and buyer of the car need to understand the insurance policy of the car, terms and conditions, when it comes to transferring the policy, retaining no claim bonus discounts. Not paying attention to these things can prove to be expensive and cumbersome for both the seller and the buyer.
For the seller, it is very important to check whether the policy is transferred in buyer’s name. The certificate of No Claim Bonus (if there are any) should be claimed by the seller from the insurance company as soon as the policy gets transferred. No Claim Bonus here refers to the bonus that is provided to the policyholder if he/she gets a claim free year. The percentage of No Claim Bonus varies between 20 and 50% based on the number of claim free years. One important thing to note here is that this No Claim Bonus cannot be transferred by the seller to the purchaser.
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The maximum limit of No Claim Bonus is of three years. No Claim Bonus can be transferred to the new policy purchased within these three years. Moreover, you can transfer your No Claim Bonus if you switch your insurance company.
Buyers need to understand that it is important to transfer the ownership of the insurance policy in their name within two weeks of purchasing the car if you do not want to take the risk of rejection of the claim. According to IRDA, insurance claims will not be settled if the insurance and registration of the vehicle are not having the same name and address.
Transferring Insurance Policy
To transfer an insurance policy, the seller has to convey this to his/her insurance company, that too in writing. For that to take place, the seller has to pay a very nominal fee along with the pro-rata recovery of the No Claim Bonus from the date of transfer till the policy expires.
Components of Motor Insurance
A motor insurance policy mainly includes:
- Package policy or comprehensive policy that includes third party or Own Damage Cover)
- Coverage against damage to your car will not be provided in case of Liability Only Policy or Third Party Motor Insurance Policy. On the other hand, Own Damage (O.D) provides coverage against the expense of replacing the vehicle or repair of damages to the vehicle.
Calculation of Sum Assured
In a car insurance policy, the sum assured is calculated by the actual worth of the car and IDV (Insured’s Declared Value). Current value and the depreciation value of the car decide the IDV of the vehicle.
Selecting a Motor Insurance Company
Before selecting a car insurance company, a person should know the traits of a good company. A good car insurance company should cover a huge network of service stations and garages that provide cashless services. In addition, a good car insurance company should have a record of quick claim settlements.
Factors affecting Premium
The payable premium on a motor insurance policy varies from company to company. The major factors that decide the premium to be paid include personal accident cover, different IDV estimation methodology, discounts offered, etc. One important thing to take care of is that the information in your car insurance policy about the vehicle should be same as mentioned on the registration certificate of your vehicle plus clearance certificate, seating capacity, fuel type, and model type.
Some insurers try to decrease Insured’s Declared Value in order to reduce the premium. This seems to be a profitable proposition in short term, as the policyholder will have to pay a low premium, but decreasing IDV will also decrease the sum assured at the time of the claim, as it decreases the total cost of your car.
The payable premium on personal accident cover is approximately the same across all the insurance companies.
At the time of renewal
- If no claim is made, then the premium of the present year will be lesser than that of last year.
- If No Claim Bonus is earned by the policyholder, then the premium will be reduced according to the conditions as against the conditions of last year’s premium paid.
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