Gaurav Garg, CEO of Tata AIG General Insurance, remembers taking a certificate for no-claim bonus when he sold his car and transferred his motor cover before going abroad. It has been a very long time now and he says his motor insurer most probably did not honour the certificate for a discount on a new policy there.
But, if you are selling your car and have had a no-claim history, you can easily utilise it at the time of buying a cover for your new car.
No-claim bonus is a premium offered at the time of renewing your motor insurance policy. Insurers offer it only if you haven’t made any claim during the policy period. If you don’t make a claim for one year, you earn a discount of 20 per cent on the renewal premium. If there are no claims for two consecutive years, you can get 25 per cent discount, no claims for three years mean a discount of 35 per cent. And, no claims for four and five years at a stretch would mean discounts of 45 and 50 per cent, respectively.
There are two ways of using it. You can transfer the policy in the name of the buyer of the car and get a no-claim bonus certificate or no-claim bonus reservation letter from the insurance company. “You can produce this certificate at the time of buying a new policy for your next car and earn a discount on the premium or you can take a refund of the same,” says Garg.
After verifying the information, the new insurer will sanction the no-claim proceeds for the new policy and cancel the old one. In this case, the buyer will have to buy fresh insurance cover for himself.
The buyer needs to transfer the policy in his/her name in the Registration Certificate of the car, too.
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“The insurance company will ask the buyer to pay the difference in no-claim bonus to the company. This will be on a pro-rata basis till the policy completes the one-year period. For example, you transfer the policy on August 23, 2011, and the one-year period ends on December 31, 2011, you will need to pay the no-claim bonus for this period,” says K N Murali, senior vice president and head of motor vertical, Bharti AXA General Insurance.
Or, you need not transfer the policy to the buyer and use it for a discount on the cover for your new car. The buyer will then need to buy a fresh cover.
Insurers say no-claim bonus follows the owner, not the vehicle. Only the class of vehicle should be the same. For instance, no-claim for a two-wheeler cover can be transferred only to another two-wheeler.
Garg says you can also take a no-claim certificate, inform the insurer and reserve the bonus if you are not buying a new car immediately after selling the old one or even if you don’t want to use the bonus right away. You can enjoy the no-claim bonus on the premium for your new vehicle if you purchase it within three years of the date of cancelling/transferring the policy.
Never transfer the policy without informing the insurer. “The seller can retain the NCB but has to transfer the policy also, or else, when a claim comes up in the intervening period, an issue can arise as to who has the insurable interest,” says Vijay Kumar, head of motor insurance, Bajaj Allianz General Insurance. And, the buyer may not be able to get the entire claim amount. Therefore, it is important to get the transfer letter of the vehicle.
Remember that only third-party covers are transferred. It is up to the buyer to upgrade it to a comprehensive policy. Or, he/she can cancel the old policy and buy a new comprehensive policy. Murli says it is better to opt for a new policy and cancel the old one, because the individual is not entitled to accumulated no-claim bonus if the old policy is held for less than a year. The process, however, involves a lot of paperwork.
