How To Transfer Car Insurance

Prachi is selling her car. She puts the word out, meets potential buyers, and finally agrees to sell it to Rashmi. They agreed on a deal and transferred the car registration certificate. The deal is done, and both can go their separate ways, right? Not really.

They forgot one crucial document : Car Insurance.

When selling or buying a second-hand car, transferring all essential documents like the car’s insurance is crucial for both buyers and sellers. Whether bidding farewell to your trusted vehicle or bringing home a new ride, it’s essential to understand the intricacies of insurance transfer.

Why Should You Transfer Car Insurance?

Besides transferring the car ownership to the new buyer, it’s also crucial to transfer the insurance of the car. Here’s why:

1. Avoid Future Liabilities

While the global road crash deaths are decreasing, the situation seems to be getting worse for India with numbers increasing from 1.3 lakhs in 2010 to 1.5 lakhs in 2021.^[1] If you buy a second-hand car and unfortunately, there is an accident resulting in third-party liabilities, you won’t be able to make a claim if the policy is still in the previous owner’s name. 

On the other hand, as a seller, you may have to pay for these expenses, even though you’re not the car owner anymore. To avoid such situations, it’s important to transfer the car insurance to the buyer at the time of sale.

2. Keep No Claims Bonus 

If you don’t make an insurance claim throughout the policy period, the insurance provider offers you a No Claims Bonus (NCB). It is a discount on your premiums for the next year and can accumulate over time, leading to significant savings. As a seller, you can retain your accumulated NCB even after selling the car. To continue enjoying this benefit on your new car, you must inform the insurance company about the car insurance name transfer on the previous car and obtain the NCB certificate.

How To Transfer Car Insurance After A Sale?

Transferring car ensures the new owner is legally covered and the responsibility for the vehicle is correctly shifted. Follow these steps for car insurance name transfer :

Step 1: Visit the official website of your RTO and download Forms 28, 29, and 30. You can also visit their office to obtain these forms physically.

Step 2: Fill out the forms with the required personal and vehicle details. Make sure to verify if all information is accurate.

Step 3: Submit these forms at your nearest RTO to obtain the Clearance Certificate. This certificate acts as proof of the sale and shows that you’ve completed all the required formalities.

Step 4: Submit this Clearance Certificate to the insurance company to begin the car insurance name transfer process.

Step 5: Complete all formalities as per their instruction and pay any applicable fees to transfer the policy. The buyer will receive the policy documents via email or through a courier service.

Once the transfer is complete, make sure to keep copies of all documents for future reference

Documents Required To Transfer Car Insurance

To transfer the insurance of the car, you need the following documents:

• The vehicle’s original Registration Certificate (RC).
• Receipt obtained from the RTO for forms 28, 29, and 30. These should be signed by the buyer and seller as proof of the sale.
• A No Objection Clause (NOC) is to be provided to the buyer.
• A valid address proof of the buyer.
• Passport-sized photographs of the buyer and seller.
• The original document of the car insurance policy to prove the vehicle is insured.
• An inspection report of the car. This report highlights the car’s condition and insurability.
• No claims bonus difference amount.

Can The No Claims Bonus Be Transferred To The New Owner?

No, when transferring the car insurance policy, the NCB cannot be transferred to the new owner. This is because NCB is a reward that the insurance company gives the policyholder for not making any claims during the policy period. It is associated with the policyholder and not the insured vehicle. 

If the seller buys a new car, they can transfer the NCB to the new vehicle’s insurance policy. The buyer, however, will have to start fresh and accumulate their own NCB.

Key Takeaways

Transferring the car Registration Certificate is not enough when selling or buying a second-hand car. You must also transfer the car insurance policy to avoid future financial liabilities and retain the No Claims Bonus (NCB). Since the NCB is associated with you and not the car, you can retain it and use it for a discount on a new policy for a different car under your name. It also protects the buyer from third-party liabilities and potential damages.

Once the transfer is complete, make sure to keep copies of any important documents for future reference.

Using platforms such as PhonePe can simplify the process of selecting and buying the right car insurance.