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Buying a Used Car? Ignoring Insurance Transfer Could Be Risky

Meeta Sabnis Meeta Sabnis 21 June 2016

The emotion of purchasing a car – used or new – is entirely overwhelming. And in a rush to get on the road, you could miss out on necessary formalities, like transferring the car’s insurance in your name. Read on to get to the heart of the matter.

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In today's era of easy and quick deliverables, a car is a must. Other than the auto-mobile manufacturers’, the used car market has also expanded over the past decade. The reasons could differ significantly: while a learning driver may buy a used car to “get used-to-driving”, a middle-class family or young couple may have budget constraints. Whatever the reason may be, used car market is flooded today, and the below statistics testify to it.

4.2 million used cars bought in 2015

For every 10 new cars sold, 22 used cars are finding buyers

Buying a used car involves a lot of homework – researching, weighing the options, inspecting the car, test-drives, etc. And just when your efforts are at the peak to make that most-fitting acquisition, it turns out there are a couple of other mandatory formalities to be considered before you ‘own’ the car:

  • Transferring the Registration Certificate
  • Transferring the car’s insurance policy

While your car dealer and the RTO will assist you in transferring the car’s registration in your name, car insurance is something you will have to deal with yourself. It appears a little cumbersome task, but with proper knowledge and a systematic approach, it’s undoubtedly a cake walk. Let’s find out.

Insurance is Mandatory, So Don’t Squabble

Have you ever thought about car insurance while finalizing the purchase of the car? You’re not alone there. Many people are unaware that as per the Indian Motor Vehicles Act (1988), it's an offense to drive the car without valid insurance. So, whether you like it or not, you will have to deal with its insurance when you are just about to buy a used car.

The Easy and Simple Way To Transfer the Car Insurance

As per Insurance Regulatory and Development Authority of India (IRDA), a car’s insurance should be moved to the new owner within 14 days from the date of transfer of registration, failing which no claim will be payable for own-damage to the vehicle. Here is the list of documents required for a smooth transfer:

  • Old insurance policy document
  • Copy of the new registration certificate or Form 29
  • No Objection Certificate (NOC) from the previous owner/policyholder
  • A fresh proposal form
  • Inspection Report (to be carried out by the insurance company)
  • Nominal transfer fees (Approx. Rs. 50 – Rs. 100) to be paid to the insurance company
  • NCB recovery/difference amount

Does Loyalty Matter or Should You Change the Insurer?

At this juncture, it’s entirely your choice to either continue with the current insurer or change it. With so many lucrative alternatives available in the market, we recommend weighing various quotes across insurers to settle on the most suitable plan for protecting your car. Online brokers like offer a free and user-friendly platform to compare coverage options and buy the policy at a click. What’s more? Apart from an excellent after-sales service, you also get assistance of a dedicated claims team for all your claims-related concerns.

Factors To Consider Before Finalizing the Most-fitting Plan

  • Your car’s IDV: As this is the final amount you will be compensated with in case of theft or total damage—the higher, the better. However, please note that higher IDV will attract a bigger premium.

  • Discounts on offer: Most insurers offer similar discounts. Some of the car insurance discounts are as below:

  • No Claim Bonus (NCB): Since you will be the new owner of your recently bought used car, you will start with 0% NCB. With every claim free year, you can accumulate NCB. Here’s how it works year-on-year:

No claim made in preceding 1 year of insurance20%
No claim made in preceding 2 years of insurance25%
No claim made in preceding 3 years of insurance35%
No claim made in preceding 4 years of insurance45%
No claim made in preceding 5 years of insurance50%
  • Membership of AAI: If you are a member of any of the registered Automobile Association of India, you can avail further discount.
  • Profession & Age-based Discounts: Certain professions like being a Government Employee, attract special discounts. Furthermore, some insurers allow age-based discounts on the own-damage premium.
  • Installing Anti-theft Devices: If your car is installed with anti-theft devices approved by the Automotive Research Association of India (ARAI), then you can avail additional discounts.
  • Voluntary Deductible Discount: If you choose to bear a part of the claim amount, then you can get an extra discount on your premium. Here’s how it specifically works:
Voluntary DeductibleDiscount
Rs. 2,500.0020% on the OD Premium of the vehicle, subject to maximum of Rs.750/-
Rs. 5,000.0025% on the OD Premium of the vehicle, subject to maximum of Rs.1500/-
Rs. 7,500.0030% on the OD Premium of the vehicle, subject to maximum of Rs.2000/-
Rs. 15,000.0035% on the OD Premium of the vehicle, subject to maximum of Rs.2500/-

Insurer’s Claim Settlement Ratio & After-sale Services: Before you pay for the insurance premium, it’s always a smart move to review the insurer’s market standing and its claim settlement ratio. Also, do read reviews about their post-sale services to help you make a well-informed decision.

The Mathematics of No Claim Bonus

Many new buyers assume that along with the transfer of the car insurance, they are also entitled to the No Claim Bonus stated on its previous policy. However, NCB is a way of rewarding the owner of the car for claim-free years and is granted to him/her (insured) and not the car. Therefore, the previous owner of the car can very well retain his/her NCB and can also transfer it to the insurance policy he/she would purchase for the new car in future.

As specified in the table above, NCB is gained in percentage over claim free years. Hence, if the previous insurance policy has any NCB discount on it, the same will be revoked while transferring the policy in your name. This change will lead to an increase in premium, and you will have to bear the difference. Many buyers do not consider this point and are puzzled when asked to pay the differential amount.

Likewise, if you are a seller, who wants to retain your No Claim Bonus, you must submit the following documents to your insurance company.

  • Request letter towards cancellation of policy
  • Original insurance 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 booklet with name of the new owner

In a Nutshell..

The process of transferring the insurance of a car in your name may seem pretty tiresome and time-consuming. However, with the comfort of online dealing, it’s quite easy and fast. The documents can be shared in the form of soft copies, wherever possible. What’s more? Online insurance brokers like also arrange for the mandatory inspection of your car at your doorstep to simplify the process for you.

With a few formalities and documentation on time, put all your worries at rest and relish those pleasurable drives full of nothing but priceless memories.

Meeta Sabnis
Written by Meeta Sabnis
Her mantra in life is to dream, and dream until you turn them into reality. A neurotic Kajol fan, Meeta loves spending time with her gorgeous twins, ensuring a childhood they’ll be proud of. Bargain hunting, crazy dancing and romancing alphabets are some of her other cravings. She’s currently a Content Writer at Coverfox.