Personal Finance

How to insure your second-hand vehicle

Sajja Praveen Chowdary | Updated on October 26, 2019 Published on October 26, 2019

The vehicle registration certificate and the insurance policy must be in the same person’s name

It is quite common for insurance companies to come across cases where the owner of a second-hand car files for a claim with an insurance policy which 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 even after the vehicle’s ownership has been changed. As per 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 in favour of an insurance company and backed the firm’s decision of not entertaining a claim request in which a second-hand vehicle owner filed for a claim with an insurance policy still in the name of the first owner

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, many who buy a second-hand vehicle are not aware of the fact that it is not only very important for them to get the vehicle registered in their name, but also equally important to have the insurance of the vehicle transferred to their name.

With the new Motor Vehicle Act coming into effect on September 1, 2019, it is now very important 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 called for a fine of ₹1,000.

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

Considering the 100 cent hike in the penalty for driving a vehicle without valid insurance, it is important to either get insurance transferred to your name while buying a second-hand vehicle, or to buy an fresh policy under your name.

It is strongly suggested to opt for the latter, i.e., buy a new policy as it helps in procuring NCB (no-claim bonus) for the entire period you’ll drive your car.

Transferring vs buying new policy

Once you purchase a second-hand vehicle, under Section 157 of the Motor Vehicle Act, a duty is cast on the new vehicle owner to get the insurance policy transferred to their name by applying to the insurance company within 14 days of the purchase.

In these 14 days, only the third-party component of the insurance is transferred to the new owner’s name; the insurer will not entertain any claim on the ‘own damage’ portion of the insurance in this interim period.

If the new owner fails to get the insurance policy transferred to their name in the first 14 days, the insurance company is not liable to bear any losses incurred by the new owner due to any accidents or other damage to the vehicle.

If you want to avoid risks, it is better to buy a new policy than transfer the old policy. One, by buying a new policy, you become eligible for NCB; two, the insurer will be responsible to pay for any ‘own damage’ caused to the vehicle from day one of purchase of the policy.

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

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on October 26, 2019
This article is closed for comments.
Please Email the Editor