Consequences of Not Transferring a Bike Insurance Policy for a Used/Second-Hand Bike in India

Why is Bike Insurance Transfer So Important?

Most people know that when you buy a second-hand vehicle in India, the registration certificate (RC) needs to be transferred to you. However, the bike insurance policy does not automatically transfer along with the RC. A manual step needs to be done by contacting the respective bike insurance company.

Under the Motor Vehicles Act, 1988, it is mandatory for every vehicle to have valid and active third-party bike insurance in the name of the current owner. Failing to do so can cause legal consequences and financial losses, which are explained below:

What Happens If You Don't Transfer Bike Insurance of Used Bike?

Let's take a closer look at each consequence with explanations and examples.

1. Claim Rejection by the Insurance Company

   Explanation:

   Even if the two-wheeler insurance policy is still active, it is legally linked to the previous two-wheeler owner; the company has a contract with that person, not with you.

   What happens:

   Your claim will be rejected if your bike is involved in an accident or gets stolen, and the 2-wheeler policy is still in the previous owner's name.

   Example:

   Suppose you bought a used bike from your friend. A week later, you get into an accident and apply for an insurance claim. If you haven't updated the policy in your name, the insurer will say, “We're not liable as you are not the insured person.”

2. Legal Trouble in Third-Party Accidents

   Explanation:

   Since third-party bike insurance is compulsory by law, it covers damage or injury caused to other people or their property in a road accident by the policyholder.

   What happens:

   If someone is injured or their vehicle/property is damaged because of your bike, and the 2-wheeler insurance policy hasn't been transferred:

   • The third party will file a legal claim against you.
   • The bike insurance company will refuse to pay, as you're not the registered policyholder.
   • You must pay compensation from your pocket to cover the medical expenses or repair a third party's vehicle.

   Example:

   Your second-hand bike accidentally hits a pedestrian. The person sued for medical expenses as he got injured. If the policy is not in your name, the court may ask you to pay it on your own, and the insurance company will not help you here.

3. Violation of the Motor Vehicles Act

   Explanation:

   The Motor Vehicles Act of India mandates that all two-wheelers must have valid & active bike insurance in the current owner's name. Failing to do this is a legal offence.

   What happens:

   • You must pay a challan of at least ₹2,000 or more for driving an uninsured vehicle.
   • Sometimes, your driving license can be suspended or the bike seized.

   Example:

   During a routine traffic stop, the police check your papers and see that the bike insurance is still in the previous owner's name. You're penalized on the spot.

4. Loss of No Claim Bonus (NCB)

   Explanation:

   NCB is a discount you get for every year you don't raise any claim during the policy period. It's linked to the policyholder, not the vehicle.

   What happens:

   • If you don't transfer the bike insurance policy, you cannot benefit from the NCB that the previous owner may have earned.
   • Also, if you buy a new policy later, you start from zero, even if no claims were made earlier.

   Tip:

   The previous owner can retain their NCB when they move to a new vehicle, but you won't get any of it unless the policy is transferred and appropriately endorsed.

5. No Coverage for Theft or Accidental Damage

   Explanation:

   “Own damage” coverage protects your bike from risks like accidents, theft, fire, and natural disasters.

   What happens:

   Suppose your bike gets stolen or is damaged in an accident, and the own-damage bike insurance policy or comprehensive bike insurance policy isn't transferred. In that case, you will not be able to claim any compensation. Additionally, you'll have to bear all repair or replacement costs yourself.

   Example:

   If your newly purchased second-hand bike gets stolen while parked outside your home, you can't file a claim unless the insurance was already transferred to your name.

6. Issues During Future Resale

   Explanation:

   If you plan to resell the bike later, a complete and accurate set of documents makes the process smooth and fast.

   What happens:

   A buyer may refuse the deal if the bike insurance is still under the old owner's name. You might have to redo paperwork, face delays, or accept lower offers due to incomplete documentation.

What You Risk by Ignoring Insurance Transfer?

Essential Documents to Check When Buying a Used Two-Wheeler

Before finalizing the purchase of a second-hand bike, it's important to verify and collect the necessary documents from the seller. These papers ensure that the transfer of bike ownership, two-wheeler insurance update, and future legal formalities go smoothly.

Here's a checklist of documents you should obtain:

Registration Certificate (RC) of the Bike

• This is the most crucial document, as it legally proves the ownership of the vehicle.
• Verify that the engine and chassis numbers match the bike.
• Ensure that the RC is original, not a duplicate.
• If the vehicle has been registered in another state, confirm if a No Objection Certificate (NOC) is available.

Existing Bike Insurance Policy

Collect the current bike policy to check its validity and coverage.

• Ensure that it's still active and not expired.
• This policy can be transferred to your name, saving you from having to buy a new one immediately.

Purchase Invoice (Original Bill)

This shows the original purchase details, including the cost, date of purchase, and dealer information.

• It may be helpful for calculating depreciation, claiming warranty (if still active), or for ownership history.

Form 32 and Form 35 (if under loan)

If the bike was purchased on a loan:

• Form 32 confirms that the bike loan has been repaid.
• Form 35 is the No Objection Certificate (NOC) from the financing bank or NBFC, confirming that the hypothecation has been cleared.
• These forms are essential for removing the loan lien from the RC.