Transferring Car Insurance from One Person to Another

In the current economic climate that encourages consumers to “reduce, reuse and recycle”, it is becoming increasingly common for people to purchase second-hand or used vehicles. In India, the demand for second-hand cars has grown exponentially. However, vehicle ownership does not end with choosing the ideal brand, the preferred model and a buyer who meets your price point. An integral part of the process, for both the buyer and the seller, is ensuring successful car insurance transfer to the new owner.

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When buying a new car, the first step is transferring the registration certificate. The new owner must treat this as an essential step in the buying process and not an afterthought. But sadly, most people have no clarity about how to transfer car insurance. It is the step that precedes the car insurance transfer process.

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Why Do You Need to Transfer Car Insurance?

As you are already aware, car insurance is purchased to secure a car from unforeseen risks. If you no longer own the car, there is no point of 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 car insurance policy transferred to your name.

Besides, there are two reasons why you should transfer your car insurance policy:

  • To Avoid Any Future Liabilities

    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 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.

  • To Retain Your No Claim Bonus

    For every claim-free policy year, you earn No Claim Bonus that helps you 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 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 car insurance policy to the new owner of the car.

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The Car Insurance Transfer Process

The car insurance transfer process works in tandem with the transference of ownership. Once the car is bought by the new owner, the policy of the previous owner does not remain valid. According to the Insurance Regulatory and Development Authority of India, in case motor insurance claim has to be filed, the name and address on both the registration and insurance documents have to match.

This is required because in case of an emergency, it comes handy for the new owner to recover cost of damages. In addition, failure to insure one’s vehicle can result in denial of a claim.

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Along with a Rs. 50 transfer fee, the following documents as required for car insurance transfer:

    • New copy of the registration certificate/form 29.
    • Old policy document.
    • No Objection Clause (NOC) from the previous policy holder.
    • New application form.
    • Inspection Report (to be carried out by the insurance company).
    • No Claims Bonus difference amount. 

No Claims Bonus

In the process of selling a used car, while the previous owner signs over the registration and insurance details, there is an important exception to the car insurance transfer process: the No Claims Bonus (NCB). The No Claims Bonus is a ‘reward’ from insurance providers to safe drivers for not making any claims. If an old insurance policy is cancelled, it gets transferred to a new car. Upon producing an NCB retention letter to their new insurers, the previous policy holder becomes eligible for discounts on his insurance premiums. In fact, the greater the number of years, the more is the benefit/discount accumulated.

Rates for NCBs are Listed Below:

No Claims Benefits Rates

After 1 claim-free year

20 percent

After 2 claim-free years

25 percent

After 3 claim-free years

35 percent

After 4 claim-free years

45 percent

After 5 claim-free years

50 percent

While buying or selling a car, this component 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 anniversary, and never filed a claim during the policy period, then he/she is entitled to a 45 percent NCB discount. A few months down the road, he/she might become the owner of a new car for which the policy premium could be Rs. 25,000 of which the damage component could comprise Rs. 20,000.

If he/she applies her 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, her total payable premium would be Rs.16,000 instead of the full Rs.25,000.

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The Following Documents are required for the NCB Retention Letter:

The insurer will ask for the following documents to issue the NCB retention letter:

    • Request letter for policy cancellation.
    • Original policy copy and certificate of insurance (also called Form 51).
    • Form 29 (notice of transfer of ownership of a motor vehicle).
    • Form 30 (application for intimation and transfer of ownership of a motor vehicle).
    • Photocopy of registration certificate book with name of the new owner.
    • Proof of delivery of car to the new owner.

Investing in a new asset requires thought 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.

What Happens if the Car Insurance Transfer Remains Incomplete?

Two things can happen if a car insurance transfer is not completed:

Firstly, if you do not transfer the existing motor insurance on your second hand car to your name, you will be unable to make any car insurance claims. Whether your car suffers damages or you incur any third party liabilities, you won’t be able to raise a claim with the insurance company covering the car.

Secondly, if you do not transfer the car insurance to the new owner of the car, then the Motor Accidents Claims Tribunal may order you to pay for accidental third party liabilities for the damages caused by the new 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.

As per Section 157 of the Motor Vehicle Act, 1988, the person who sells the car is responsible for ensuring the transfer of the existing car 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.

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FAQs About Car Insurance Policy

  • Q: Can I transfer third party car insurance?

    Ans: The third party car insurance can be transferred from the previous owner to the new owner of the vehicle. Although third party cover is automatically transferred for the first 14 days of the purchase, the cover has to be transferred to the new cover to ensure coverage from the 15th day.
  • Q: What is the format for car insurance transfer letter?

    Ans: You should write the car insurance transfer letter by addressing the manager of your motor insurance company and request him/ her to transfer the policy. Alternatively, you can also download the application for car insurance policy transfer from the website of your insurer.
  • Q: Can I transfer my NCB to the new owner of my car?

    Ans: No. You cannot transfer your NCB to the new owner of the car as NCB is granted to the policyholder for not raising any claims and not to the car.
  • Q: Can I transfer my car’s RC without transferring vehicle insurance?

    Ans: No. You cannot transfer the RC or registration certificate of your car to someone else’s name without a vehicle insurance policy. This is because car insurance is one of the documents to be submitted to the RTO to get your four wheeler’s RC transferred.
  • Q: How much time does it take for an RC to be transferred?

    Ans:Usually, it takes about 20 to 60 days to get the RC of a car transferred depending on different situations. The time frame varies if the new owner of the car also falls under the jurisdiction of the same RTO or if his/ her RTO is in a different state. Similarly, the time frame is different in case the previous owner has died and the policy has to be transferred to the name of his/ her legal heir.
  • Q: How much fee do I have to pay to transfer the ownership of my car?

    Ans:The car ownership transfer fee varies from one state to another. For example, the fee for transferring the RC in Delhi is Rs 530.
  • Q: Can I transfer the ownership of my car online?

    Ans:No. You cannot transfer the ownership of your car online. You will have to physically visit your RTO and submit all the required documents to get the ownership of your car transferred to someone else.
  • Q: Can I get a NOC from my RTO online?

    Ans:Yes. You can get a NOC or No Objection Certificate from your RTO online by downloading Form 28. The form acts as an application to issue the NOC and should be submitted to your RTO along with other required documents. After your police verification and clearance of Audit Para, your RTO will issue you a NOC.
Written By: PolicyBazaar - Updated: 13 September 2021
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