Buying a car in our country is still considered a luxury. But, not everyone feels the need to buy a brand new car due to several reasons. Many of us opt to buy a Second-Hand car. The number of second-hand cars sold is higher than the number of brand new cars sold in India. As per a report published by the IndianBlueBook, in 2018-19 there were 3.6 million brand new cars sold. Whereas 4 million second-hand cars were sold in the same year. Another report by Mint says that the Second-Hand car market is seeing a boom in the last four years. The current pandemic situation has also affected the semiconductor industry badly. There is a severe shortage of semiconductors in the whole world. This has affected the production of cars and many orders are delayed. Automobiles companies are unable to fulfill the demand. As a result, there is a high chance that people will switch to buying second-hand cars, and eventually, the market for second-hand cars will further witness a huge rise in demand.
Now, when you buy a second-hand car, you make sure that all the concerned documents are also transferred to your name including the Car Insurance Policy. You might be aware of the procedure to transfer all other documents but here we are only going to focus on discussing how to transfer a car insurance policy for a second-hand car. Let�s start our discussion by first knowing about what a car insurance policy is.
A car insurance policy is done to provide a safeguard to your vehicle from unforeseen risks. It is also known as auto insurance or motor insurance. The purpose of car insurance is to protect against the losses incurred as a result of unavoidable instances. Car insurance helps us by providing cover against theft, financial loss caused due to accidents, and any subsequent liabilities. The cover level of car insurance includes :
(i) Insured Party (ii) Insured Vehicle and, (iii) Third Parties (car and people).
The premium of the insurance is dependent on some parameters like:
(i) Value of the car (ii) Type of Coverage (iii) Vehicle Classification (iv) Voluntary Excess, etc.
Car Insurance gives the confidence to drive peacefully. In emergencies, a car insurance policy acts as a boon to the insurance holder. According to a report by the General Insurance Council, India had approximately 19 Crore registered automobiles in the financial year 2015-2016. Out of this 19 Crore, only 8.26 Crore were insured which constitutes less than 50% of the total registered automobiles. These statistics depict the lack of awareness among people about these insurance policies. Now that we know about what a car insurance policy is and what all it offers, let�s discuss the benefits of having a car insurance policy.
According to the Motor Vehicle Act, third-party insurance is mandatory whether you buy a new or a used vehicle. You have to purchase it in both cases. In India, driving without valid car insurance is not legal. Now, you might be thinking about why it is so important? It is very helpful for you as a car owner. It has the following benefits :
(i) It facilitates the car owner with payment for damage. (ii) The Car insurance Policy ensures minimizing the liability. (iii) It also provides death benefits to the family of the owner.
Need for transferring the Car Insurance Policy
Car insurance is important as it protects against the losses incurred as a result of unavoidable instances. Now, if you are no longer the owner of a vehicle then there is no point in keeping the Insurance policy with you. So, it�s better to transfer the policy to the new owner of the Car. It will be very useful for him/her. And, if you are going to buy a second-hand car then please make sure that the policy is transferred to your name. There are some more reasons which justify the need for transferring the car insurance policy, they are :
(i) To avoid any future liabilities. In case you fail to transfer the policy to the new owner, then you may be held responsible for the accident liabilities that belong to the new owner of that car as you are still the policyholder.
(ii) On the other hand, if you purchased a second-hand car, and the policy has not been transferred to your name then you can�t file a claim in case your car meets an accident.
(iii) If you are selling your car then without transferring your current Car Insurance Policy to the new owner you can�t obtain the NCB Certificate (No claim Bonus) and related benefits. You have to pay the complete amount of premium (without any discount) when you purchase a new car and policy.
Transferring car insurance is transference ownership. The Validity of the car insurance gets over as soon as the new owner purchases the car. As per the Insurance Regulatory and Development Authority of India, when someone files a motor insurance claim (car insurance), the name and the address on the registration as well as the insurance document have to be the same. This is very crucial and required because when there is an emergency, it will become easy for the new owner to recover the damage cost. And, in case you fail to insure one's vehicle, your claim can be denied.
Now, you have to pay ?50 as the transfer fee and submit the following documents for transferring the car insurance :
(i) Fresh copy of Registration Certificate/ Form 29 (Notice of Transfer of ownership of a motor vehicle) (Click on the link to get the form: https://vahan.nic.in/nrservices/forms/form29.pdf) (ii) Document of Old Policy (iii) A No Objection Clause (NOC) From the previous Policy Holder. (iv) New Application Form (v) An Inspection Report (which will be carried out by the insurance company) (vi) No Claims Bonus Difference Amount.
A no-claim bonus is an appreciation to the owner for responsible ownership by the Insurance Company in terms of discount. It says that even after selling your car, the no claim bonus will still belong to you only and will apply to the new car you buy. Transferable at Your Convenience. You can transfer the NCB from your first insurance very easily whenever you shift to another insurer. When an old insurance policy is canceled, it gets transferred to a new car. Once the new insurer gets the NCB Retention Certificate, then the previous owner of the policy is now eligible for discounts on his insurance premium. The greater the number of years, the more the benefit or discount accumulated.
Following documents are needed in order to get the NCB retention Letter :
Proof that the car has been delivered to the new owner.
To a buyer, even if the car is a used one, it's still a new asset. So, it is legit that the process includes a proper transfer of rights, ownership and insurance to the new owner.
Calculating Correct NCB:
In the haste of transferring the Insurance Policy to the new owner, people often ended up filling any random figure when they are asked to mention the No Claim Bonus Difference Amount. This can be troublesome for the owner of the policy in the future as it can lead to a rejection of your car insurance claim altogether. It�s pointless to declare a wrong figure as this data can easily be accessed by the Insurance Companies. However, you might get the policy but it can be problematic when it comes to making a claim.
You might have an idea till now about the importance of mentioning a correct figure when it comes to NCB. Now, before coming to calculating the NCB value, there are some points that one should keep in mind which is,
�A third party liability insurance premium generally accounts for up to 20% of the total premium amount which is not included while providing NCB discount. So, your earned NCB percentage will be calculated on: TOTAL PREMIUM - THIRD-PARTY LIABILITY PREMIUM.�
Also, the greater the number of claim-free years, the greater will be the benefit or discount. You can earn a discount of up to 50%. Some NCB rates are as follows:
| CLAIM FREE YEARS | DISCOUNT (IN PERCENTAGE) |
|---|---|
| 1 | 20% |
| 2 | 25% |
| 3 | 35% |
| 4 | 45% |
| 5 | 50% |
Let�s discuss an example. A man plans to sell his car after 3 claim-free years since he has bought the policy. So, he qualifies to get an NCB discount of 30%. After some time he purchased a new car and the policy premium for which could be Rs. 30,000 out of which the damage component could be Rs. 20,000. If he wants to apply the NCB discount that he gained from the previous policy to this amount, in that case, the damage component would be reduced by 35%. Now, 35% of Rs. 30,000 = Rs.10,500 Remaining Amount from the present policy = Policy Premium - Damage Component = Rs. 30,000 - Rs. 20,000 = Rs. 10,000 So, finally, the Total Payable Premium = Amount discounted + Remaining Amount = Rs. 10,500 + Rs. 10,000 = Rs. 20,500
Therefore, his total payable premium after applying the discount is Rs. 20,500 instead of the complete amount i.e., Rs. 30,000.
Conclusion
Policies like Car Insurance exist to provide all of us a safeguard from unforeseen risks or accidents. One should ensure to take it whenever he/she buys anything that acts as an asset for them. At the same time, it is also important to do proper documentation with all the correct information whenever you are buying or selling a car. You have to have all information about your rights, discounts, suitable policies, etc. It will all benefit you in the long run.