Why your second hand vehicle needs insurance too.
Insurance companies often come across instances of second hand car insurance claims, where the new owner claims for damages to the vehicle without having transferred the insurance policy in his name after the purchase. The claim however is not admissible in the absence of a valid contract between the insurance company and the new owner of the vehicle. In a recent case, the Pune Consumer Court ruled in favour of the insurance company and upheld the insurer’s decision of not paying the claim to a second hand vehicle owner since he had not transferred the insurance policy to his name. The Court ruled that an insurance policy is a contract between a policy holder and an insurer. In the absence of the new vehicle owner’s name on the motor insurance policy, there exists no valid contract between him and the insurance company. Hence any accidental damage suffered by the new owner is not admissible under the previous policy.
Owing to low awareness on insurance amongst the general public instances of post loss insurance grievances in such scenarios are common place in India. Hence it is important for individuals who have purchased or are looking at buying a second hand vehicle, to know that transfer of insurance is an equally critical aspect of the buying process and should not be ignored or procrastinated. Also, the individuals who sell their vehicle have an equal responsibility to ensure that the insurance is transferred in the new owners name to avoid any legal hassles that may arise in the future. Here we shall explain how not transferring of insurance will impact both the buyer and the seller of the motor vehicle. We shall also demystify for you the procedure of ensuring a seamless insurance transfer.
To begin with it is important to understand the structure of a motor insurance policy. A comprehensive motor insurance policy comprises of two parts – Own Damage (OD) and Third Party (TP). Whereas TP section covers damages caused by your vehicle to a third person and is mandated by law, OD section covers damages caused to your vehicle owing to any accidental mishap. After purchasing a used car, Section 157 of the Motor Vehicle Act casts a duty on the new vehicle owner to get the insurance policy transferred in his name by applying to the insurance company within the first 14 days. For these 14 days, only the “Third Party” section of the insurance policy gets automatically transferred. However, it does not apply to the Own Damage section of the policy. The “Own Damage” section will be transferred only after the insurance policy gets registered under the new owner’s name. Post this 14 day period, if the new owner fails to get the insurance policy transferred in his/her name the insurance company is not liable to bear any losses incurred by new owner in either of the TP/OD sections.
If the insurance is not transferred and the policy still bears the name of the first owner, in case of an accident the claim for damages to the vehicle or third party will not be paid by the insurance company. Moreover, the court may also send the first owner a notice to compensate for the loss caused to a third party, for an accident caused by the new owner. The whole process of establishing the proofs of sale, the transfer of vehicle RC etc. by the previous owner can be a gruelling exercise. This can be easily avoided if both as a seller and a buyer of a second hand vehicle, one insists on getting the insurance policy transferred to the new owner’s name immediately after the sale deed is finalised.
Here are 5 points that will help you understand the insurance policy transfer procedure and will ensure a seamless transaction with the insurance company.
- As soon as you purchase a used car you must ensure that the insurance policy is transferred in the name of new owner within the first 14 days.
- To facilitate policy transfer you need to fill a fresh proposal form, and submit the evidence of sale i.e. transfer of RC, Forms 29 and 30 duly signed by previous owner along with transfer fee and previous policy copy to the insurance company. The insurance company shall then pass the endorsement of transfer.
- The change of ownership in RC may take some time at RTO office. However, to transfer policy to your name, the documents as listed above are sufficient to initiate the endorsement. Submitting a copy of new RC after it is issued by RTO will be helpful in avoiding any glitches at the time of claim.
- In case your insurance policy has been transferred but the transfer in the RC copy is not made/or the proof of same is not submitted to the insurance company, in the event of a claim you will have to furnish the proof of transfer of RC to the insurance company to get the claim.
- If the transfer is still in process the claim will not be repudiated, however it will be paid only once the proof of transfer in RC has been submitted to the insurance company.
While so much thought is put into the purchase of a second hand car, most are oblivious when it comes to transferring the Motor Insurance policy to their name. This can have huge financial impacts, in case of any damage to the vehicle, or damages to a third party in the event of an accident. As an insurer we advise on being vigilant about getting the policy transferred in the stipulated time frame as it is definitely the smarter choice, always! Visit our website for more details.