Does Scrapping Your Car Impacts Insurance Policy?
Yes, vehicle scrapping directly affects your car insurance. Once your car is scrapped and itsRead more
What Happens to Your Car Insurance Policy After Scrapping?
The Ministry of Road Transport and Highways (MoRTH) launched the Vehicle Scrappage Policy, which aims to manage end-of-life vehicles (ELVs) in India more effectively. If you plan to scrap an old, unfit, or deregistered vehicle, you must take it to a Registered Vehicle Scrapping Facility (RVSF). This process will affect your car insurance policy in the following ways:
- Immediate Policy Nullification: Since the insured car is destroyed, the contract between you and your insurance company becomes void.
- Pro-Rata Premium Refund: When you scrap your car and have several months left on your policy, you are eligible for a pro-rata refund for the remaining duration, provided you have not made any claims during the current policy year.
- No Claim Bonus (NCB) Retention: After scrapping your vehicle, you do not lose your accumulated NCB in car insurance. You can request an NCB Certificate from your insurer and apply this discount to the insurance premium of your next new car.
- Liability Protection: A formal cancellation of your insurance policy makes sure that your car's registration and engine & chassis numbers cannot be cloned or misused for illegal activities. This helps protect you from any third-party liabilities that may arise in the future.
How to Properly Close Your Car Insurance After Vehicle Scrapping?
To ensure your car insurance is cancelled in the proper manner and you receive any eligible refunds, follow these steps:
- Scrap at an Authorised Facility: Take your vehicle to a government-registered scrap yard to get an official Certificate of Deposit, also known as a scrappage certificate.
- RC Cancellation: Submit the certificate and your vehicle's physical number plates to your local RTO to officially de-register the vehicle.
- Notify Your Insurer: Provide a written notice to your insurance company along with the RTO de-registration proof and the Scrappage Certificate to initiate the policy cancellation and claim your pro-rata premium refund.
What Documents Are Required to Cancel Insurance After Scrapping?
To cancel car insurance after scrapping your vehicle, you may need to provide the following documents to your insurer:
- Your four-wheeler insurance policy copy
- Your car's registration cancellation or scrapping documents
- Vehicle ownership documents
- Your ID & address proofs and bank details for refund processing (if eligible)
- Claim form & documents (if the car was scrapped after a total loss claim)
What Happens If You Scrap Your Insured Car After a Total Loss?
If your car is severely damaged in an accident and its repair cost is too high, the insurer may declare it a total loss or constructive total loss (CTL). In such cases, the insurer settles the claim based on the car's IDV (Insured Declared Value) and the applicable policy conditions.
Your damaged car is treated as salvage and may be scrapped as part of your car insurance claim settlement. The amount you receive depends on your insurer's assessment and policy terms. You should not assume that you will receive the IDV as well as the vehicle's scrap value separately.
RTO Guidelines for Selling of Scrap Cars in India
In India, car scrapping is an authorized activity since old cars have been significantly contributing to environmental degradation. The Regional Transport Offices (RTOs) have closed the re-registering window for old vehicles and are doing their fitness test as per the new vehicle scrapping policy. If your car is declared unfit for use, do remember to inform your motor insurance company before getting it scrapped.
However, car owners can also sell or transfer their cars to a neighbouring state before the Registration Certificate (RC) expires. After the transfer, they can re-register the car at the new RTO. The re-registration details of the car have to be updated and maintained in the old RTO as well.
Final Thoughts
Scrappage of unfit and old cars is compulsory in India. It is not only more beneficial to scrap an unfit car but also safer than using it on the road. You can also avoid all complexities involved in the car's transfer to another RTO. So get your car tested for fitness and then, scrapped if declared unfit for use.
