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.
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.
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 a 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.
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
After 2 claim-free years
After 3 claim-free years
After 4 claim-free years
After 5 claim-free years
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.
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