In India, the used-car market has become larger than the new-car market. According to a recent report by Mordor Intelligence, the used-car market will continue to grow and is expected to reach a market size of USD 75 billion by 2023. Indian consumers are becoming more aware of their options that yield value for money.
Second-hand cars are always a good option as they save you money, depreciation, premium cost, etc. In the past, the used-car market was dominated by unorganised players. But with the advent of organised players and certified vehicles being readily available on digital platforms, buying a second-hand vehicle has become a cakewalk.
What about the insurance of the second-hand vehicle, though? The new owners are seldom aware of the insurance factors to be careful about when buying a new car. Most purchasers are unaware of No Claim Bonus (NCB) and Third-party Assistance (TPA) policy needs and face issues at the time of claims.
Following these tips will help you have a hassle-free claims process, if needed, in the future:
Insurance policy coverage
Since this is unlike any policy for a new car, you should opt for comprehensive car insurance as apart from a TPA, this would also cover damages to your own vehicle. A motor insurance policy covers third-party damage and their own vehicle’s damage. Depending on the car’s age and location, you can also look at the relevant add-ons.
For cars that are less than three years old, Return to Invoice (RTI) should be considered as it covers the cost of buying a new car if the current vehicle gets damaged or stolen.
For cars that are less than five years old and >INR 5 lakhs sum insured, a zero-depreciation cover is most apt as it covers the vehicle’s depreciation. Also, Road-side Assistance (RSA) is a must for challenging situations where you can get stuck needing a tyre change or a towing facility.
The process of insurance transfer from the seller
When you buy a second-hand car, you have to apply for the transfer of the insurance policy in your name within 14 days under section 157 of the Motor Vehicle Act. The third-party section of the policy gets transferred automatically within these 14 days. According to this law, if the new owner fails to apply for a policy transfer within 14 days, then the insurance company is not liable to compensate for any losses.
You will need to fill a proposal form and then submit the proof of sale, which includes registration certificate and forms 29 and 30 signed by the previous owner to facilitate the policy transfer. You will also need to remit a transfer fee and submit a copy of the previous policy to the insurer. The insurance company will then start the transfer process.
In case of an accident while the transfer is still in process, the claim will be initially rejected. However, once the proof of change in registration certificate is submitted, the claim will be honoured.
Other tips to remember while buying your vehicle
• When you buy a second-hand vehicle, you can either buy a new policy, transfer your older
policy to your new car or transfer the old owner’s insurance policy to the car bought.
• If the former owner’s policy is transferred, then the owner needs to intimate the insurance
company about the change in ownership.
• Here, the new owner has to pay any NCB difference, since NCB will remain with the old owner
and new NCB will apply to the new owner.
• The insurance document should have a change in the name of the owner, and the RC
(Registration Certificate) needs to be changed as well.
• The RC and the insurance document should be in the same owner’s name.
While selling your used car, it is to be noted that your NCB still stays with you because NCB is applied only on the driver and not on the car. A seller can utilise the NCB on a new policy bought within three years. It is important to be aware of the factors that will protect your vehicle and save you from a lengthy insurance claims process in future.
Tips by Mr. Adarsh Agarwal, Appointed Actuary, Digit Insurance
Power Drive 