14-day window only: Transfer insurance immediately when buying old vehicles

If not done within 14 days, the insurer can reject vehicle damage claims arising in the future

If you are planning to buy a second-hand vehicle, here’s a tip: Transfer the old insurance policy in your name or buy a new one immediately. This is the first step you should take to ensure that the vehicle is covered. This can be done even if the vehicle is not transferred in your name. All you need is a proof — receipt from the regional transport office (RTO) — that your application for transfer of registration certificate is in process. 

Recently, the Pune district consumer forum ruled that an insurance company can reject a claim if the new owner of a car had not transferred the old policy in his name. 

A Pune-resident purchased a used car that met with an accident two months later. While the vehicle was registered in his name, he had not transferred the old insurance policy nor bought a new one. He approached the authorised centre, which quoted Rs 1.44 lakh for repairs. But when he lodged a claim with the insurer (Bajaj Allianz GIC), the claim was rejected. The new owner approached the consumer forum and argued that because the car was in his name, it should be deemed that the insurance policy was also transferred. But the forum ruled in favour of the insurer. 

A consumer lawyer said: “According to regulations, an insurance company is liable to pay only third-party damages even if the policy is not transferred in the name of the new owner. But the insurer can reject own damages.”

An auto insurance coverage has two parts – it covers the car and also any damage caused to a third party by the driver. The later could be damage to property or payment to an accident victim (or his family, in case of death). If you have not transferred the policy after buying a used car, the insurer has the right to reject claims pertaining to vehicle damage. “The new owner gets 14-day grace period to transfer the insurance as per the law. If it’s not done within the stipulated time, then the insurer can reject vehicle damage claims,” said Neeraj Gupta, head of motor insurance at Policybazaar.com.

But Gupta said it was best to buy a new policy than transferring an old one. Most insurers charge Rs 50 as transfer fee. There’s also a vehicle inspection. The new owner doesn’t get any no-claim bonus (NCB) benefit either. In fact, if the company had given an NCB to the previous owner, they would ask the new owner to pay for it on a pro rata basis. It means, if the NCB was Rs 4,000 and the new owner purchased the car six months after the insurance policy was issued, he would need to shell out Rs 2,000. “NCB is provided to the driver and not on the basis of the vehicle. That’s why many companies allow insured to transfer old NCB when they change their vehicle,” added Gupta.

Buying a new policy will ensure that you are covered for the next one year; in an old one you will only be covered for the remaining period of the insurance. If the new owner doesn’t have any claims in the first year, he can get an NCB in the second year of the policy if he opts for a fresh insurance.

New insurance

• Provides one-year cover
• No-claim bonus possible in the second year
• Car owner needs to pay full cost
• Inspection required
• Can be bought on the basis of RTO application for transfer

Transferred policy

• Covers only for remaining period
• Possible only in the third year
• A fee of Rs 50 and also NCB on pro rata basis
• Some companies may insist on transfer
• Receipt from RTO can be used to transfer