As you are already aware, four-wheeler insurance is purchased to financially secure a car from unforeseen risks like a road accident. If you no longer own the car, there is no point in keeping the motor insurance policy with you.
Thus, when you sell your car, you must ensure that the vehicle’s new owner gets your four-wheeler insurance policy transferred to his/ her name. If you are the one buying a second-hand car, make sure to get the ongoing motor insurance policy transferred to your name.
Besides, there are two reasons why you should transfer your car policy:
If you have purchased a second-hand car, it is important to get the existing insurance policy for the car transferred to your name to avoid any future liabilities. In case you have an accident with your second-hand car resulting in third party liabilities, you won’t be able to file a third-party claim as you did not get the policy transferred to your name. As a result, you will have to pay off your third party liabilities on your own.
Similarly, if you sell your car to someone, you must transfer the existing vehicle insurance policy from your name to the new owner of the car. If you don’t, you may be held liable to pay for the third party accidental liabilities caused by the car’s new owner as you are still the policyholder of the sold car’s policy.
For every claim-free policy year, you earn a No Claim Bonus that helps you to earn a discount on your car insurance renewal premium. When you sell off your car, you need to get the earned NCB transferred so that a premium discount can be availed on the renewal of the new car’s insurance policy. To do so, you need to obtain the NCB certificate from your motor insurance company after informing them about the sale of the car. The NCB certificate cannot be obtained unless you transfer the ongoing motor insurance policy to the new owner of the car.
The four-wheeler insurance transfer process works in sync with the transfer of ownership. Once the car is bought by the new owner, the policy of the previous owner does not remain valid. This is because the name and address on both the registration certificate and insurance documents have to match according to the Insurance Regulatory and Development Authority of India (IRDAI) to raise a claim. The same name is not possible if the insured car has been sold to another person.
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Besides, a transfer of car insurance is required because, in case of an emergency, it comes handy for the new owner to recover the cost of damages. In addition, failure to insure one’s vehicle can result in denial of a claim.
To transfer the existing car insurance from one person to another, you need to raise a transfer request with the motor insurance provider. Along with a transfer fee, the following documents are required to be submitted for car insurance transfer:
In the process of selling a car, the previous owner signs over the registration and insurance details to the seller. However, there is an important exception to the car insurance transfer process i.e. the No Claims Bonus (NCB).
The No Claims Bonus is a ‘reward’ from insurance providers to safe drivers for not making any claims during their policy year. The NCB percentage can be used to reduce your renewal premiums. In fact, the greater the number of years, the more is the benefit/discount accumulated.
If an insurance policy is transferred to a new car, The NCB can be retained by producing an NCB retention letter to their new insurer. The letter makes the previous policyholder eligible for an NCB discount on the insurance premiums of the new car.
No, no claim bonus cannot be transferred to the new owner of the insured car. While buying or selling a car, this is important to remember. While car insurance can be transferred to the new owner, the NCB can never be transferred to any other party.
For instance, if a car owner wants to sell his/her car after the fourth policy year and had never filed a claim during the policy period, then he/she is entitled to a 45 percent NCB discount. Suppose he/she becomes the owner of a new car for which the policy premium is Rs. 25,000 and the own damage component is Rs. 20,000.
If he/she applies the NCB discount to this amount, the premium on the damage component would be reduced by 45 percent which works out to Rs. 11,000. Therefore, the total payable premium would be Rs. 16,000 instead of the full Rs. 25,000.
The insurer will ask for the following documents to issue an NCB retention letter:
Two things can happen if a car insurance transfer is not completed:
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As per Section 157 of the Motor Vehicles Act, 1988, the person who sells the car is responsible for ensuring the transfer of the existing four-wheeler insurance policy to the new owner of the car. The transfer should be carried out within 14 days of the sale of the car. For the first 14 days of the purchase, the third-party cover on the car is automatically transferred and remains active.
However, the own damage cover will become active only after the transfer of the policy from the previous owner to the car’s new owner. If the transfer is not made within 14 days of the car’s sale, the third-party cover will cease to exist from the 15th day.
In a Nutshell
Investing in a new asset requires thorough and meticulous planning. To a buyer, a used car still represents a new investment. So it is only right that the process includes a proper transfer of rights, ownership, and insurance to the new car owner. Therefore, make sure to transfer the existing car insurance policy to the new owner of the vehicle to avoid falling into any legal trouble.
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