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Buying a second-hand car? Why insurance transfer is crucial for buyer

When you buy a second-hand car, transferring ownership isn't just about the Registration Certificate (RC). Equally critical is transferring the car's insurance policy to your name. Experts warn that failing to do so can lead to claim rejections, penalties, and even legal trouble. Here's a step-by-step explainer on what happens to car insurance when you buy a used car, and how to get it transferred smoothly. Why insurance transfer is crucial 'Transferring the existing insurance policy to the new owner's name is not just a formality, it is both legally mandatory and financially crucial,' says Saurabh Vijayvergia, founder & chief executive officer of CoverSure. The law allows a 14-day window for completing this process. Beyond that, any claim made under the old owner's name can be rejected outright. 'A car insurance policy has two parts, own-damage and third-party liability. While third-party cover automatically transfers, the own-damage section needs formal transfer. Without it, no own-damage claims will be honoured,' said Neel Chheda, chief underwriting and data science officer of TATA AIG Insurance. According to Paras Pasricha, business head, motor insurance at the process involves submitting necessary documents and paying a minimal transfer fee to the insurer. The required documents include the original RC, valid insurance certificate, PUC certificate, Form 29 and 30 (signed by buyer and seller), address and ID proofs, and, if applicable, a No Objection Certificate (NOC) from the bank. What happens if you don't transfer insurance? If you drive without transferring the insurance, you could face serious issues. 'The new owner might face claim rejection and penalties for driving without a valid insurance policy, while the seller could face legal issues if the buyer meets with an accident,' Pasricha warns. While the third-party liability cover automatically continues under Section 157 of the Motor Vehicles Act, own-damage coverage does not, says Surender Tonk, vice-president, Insurance Brokers Association of India. 'If the insurance is not transferred, the own-damage section of the policy will not work, and any damage or loss to the insured vehicle will not be payable,' he says. 'If the policy isn't transferred, the new owner is essentially uninsured for own-damage claims. Any accident-related expenses will have to be borne out of pocket,' adds Chheda. Can you modify or switch insurance? Once the policy is in your name, you are free to upgrade or modify it. 'As a buyer, you do not have to stick with the previous owner's insurance terms. You can and should upgrade to a comprehensive cover or even switch insurers entirely,' says Vijayvergia. However, Tonk points out that while the base policy can be transferred, some add-on benefits like zero depreciation may not carry over to the new owner. What about the No Claim Bonus (NCB)? A common misconception among buyers is that the seller's NCB (discount for claim-free years) gets transferred with the car. That's not true. 'NCB is linked to the individual policyholder, not the vehicle,' says Arti Mulik, chief technical officer, Universal Sompo General Insurance. 'The seller can retain the NCB for their next vehicle, but the buyer starts fresh,' Mulik said. 'The entitlement of NCB follows the fortune of the original insured and not the vehicle or the policy. Buyers don't get any benefit from the seller's NCB,' adds Chheda.