Don’t forget to get an insurance policy for your second-hand vehicle

It is common for insurance companies to come across cases where the owner of a second-hand car files for a claim with an insurance policy that is still in the name of the first owner. Unfortunately, insurers have to reject such claims as the valid contract (insurance policy) is between the first owner of the vehicle and the insurer, but the vehicle has already changed ownership. As per the policy terms and conditions, the vehicle registration certificate and the insurance policy must be in the same person’s name.

In a recent case, a consumer court in Maharashtra ruled a judgment in favour of the insurance company and backed the insurer’s decision of not entertaining a claim request in which a second-hand vehicle owner filed for a claim with the insurance policy still in the name of the first owner of the vehicle.

The court clearly stated that as there was no written proof of any contract or agreement between the second-hand vehicle owner and the insurance company, the insurer is not liable to pay for any expenses.

Hence, any accidental damages suffered by the new owner are not admissible under the previous owner’s policy.

Changes in Motor Vehicles Act

In India, people buying a second-hand vehicle are not really aware of the fact that it is not only important to get the vehicle registered in their name; it is equally important to have the insurance of the vehicle transferred to their name.

With the new Motor Vehicle Act 2019 coming into effect from September 1, 2019, it is mandatory to carry a valid motor insurance policy which is in the name of the person under whom the vehicle is registered. Earlier, driving without a valid motor insurance attracted a fine of ₹1,000.

However, with the amendments in the current law, driving without insurance attracts a fine of ₹2,000 and/or imprisonment up to three months for the first offence and fine of ₹4,000 and/or imprisonment up to three months for the second offence.

Considering the 100 per cent hike in the penalty for driving a vehicle without valid insurance, it is all the more important to either get the insurance transferred to your name while buying a second-hand vehicle, or buy an altogether new policy that is in your name. It is advisable to go with the second option, that is, buy a new policy as it helps in procuring a no-claim bonus (NCB) for the entire period you’ll driving your car.

Transfer or buy a new policy

Once you purchase a second-hand vehicle, under Section 157 of the Motor Vehicle Act, it is incumbent on the new vehicle owner to get the insurance policy transferred in his or her name by applying to the insurance company within 14 days of the purchase.

During this period, only the third-party component of the insurance is transferred to the new owner’s name; the insurer will not entertain any claim on ‘own damage’ portion of the insurance. If the new owner fails to get the insurance policy transferred to his or her name in the first 14 days, the insurance company is not liable to bear any losses incurred by the owner due to any accidents or other damage to his vehicle.

To avoid this risk, it is better to buy a new policy rather than transfer the old policy in your name. The two benefits of buying a new policy rather than transferring the old one to your name are one, you become eligible for NCB and, two, the insurer will be responsible for damages caused to the own-vehicle from day one of purchase of the policy.

The writer is Business Head, Motor Insurance, Policybazaar.com

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