Motor vehicle insurance policy transfer comes with perks for both the buyer and the seller.
With technology developing at such a brisk pace, the automobile industry has seen great advancements over the past decade and continues to grow at a very quick rate. The auto industry is flooded with new cars and two wheelers coming out each passing day with new technology.
Since there are many options/cars available in the market at reasonable rates, people are upgrading to new vehicles that has increased the number of second hand bikes and cars by a good amount. The good thing is that there is an equal increase in the demand of these used vehicles as well.
While using second hand vehicles is a very good initiative to reduce pollution and increase savings, there are some very important factors to consider other than just acquiring the vehicle. Transfer of motor insurance - be it car insurance or two wheeler insurance- is a very important thing to take care of when you purchase a second hand vehicle. Let’s have a look at some steps about how to transfer motor insurance of used vehicles and the need for the same:
1. Need to make the transfer :
Motor vehicle insurance policy transfer comes with perks for both the buyer and the seller. The transfer is important for the buyer so that he/she can make claims if necessary. Since an insurance policy is a contract between the policyholder and the insurer, the name of the current owner is mandatory to make any sort of claim. The seller gets a reward called No Claims Bonus(NCB) if applicable.
2. What is NCB?
Insurance providers recognise safe drivers who do not make any claims and provide them with suitable discounts on the premium to be paid. Varying percentages of discounts are provided depending on the number of years passed without making a claim. The benefits range from 20% for one year upto 50% for 5 years. This discount gets transferred even if there is a change of vehicle with the help of a NCB retention letter submitted to the new insurers. An important point here is that the NCB is non transferable unlike the car or two wheeler insurance.
3. Documents required :
Before going ahead with the insurance transfer, it is advisable to consider transferring the registration certificates as the first step. Here are some of the necessary documents to get the transfer process started:
There is fixed transfer fee that has to be paid along with the premium amount to be paid. The NCB discounts, if any, are taken into consideration to arrive at the correct premium amount. Please note that you need to submit different set of documents for different type of insurance you purchase. For example, if you are buying a term plan - you need to submit documents like - proof of address and identity, income documents and age proof etc.
4. If the transfer is incomplete :
In the absence of the new owner’s name on the policy, no contract exists between the new owner and the insurance company. Accidental damage suffered by the new owner would not be covered under the previous policy unless there is a change of ownership. A comprehensive motor insurance usually has two parts - own damage and third party. Third party part of the insurance covers damages done by your vehicle to a third person. According to Section 157 of the Motor Vehicle Act, it is the responsibility of the new owner to get the policy transferred to his/her name within 14 days of the purchase. The third party part of the auto insurance policy is automatically transferred to the new owner. However, if the owner fails to transfer the insurance policy within 14 days, the insurance company will not bear any losses, even if the damage is to a third party.
There are many insurance companies in India that provide the portability option to insurers. Like motor insurance transfer, you can also transfer your health insurance plan from one insurer to another.
One important thing for everyone to keep in mind is that whether you are buying or selling a second hand vehicle, always make sure to transfer the insurance as well. Having an insurance- be it life insurance, car insurance or health insurance is very important and could prove very helpful in circumstances that could usually cause a lot of financial distress. Transferring the insurance as soon as possible helps one stay worry free while driving, which is never a bad thing.
(This article was originally published on BankBazaar.com)