In the recent few years, the sale of second hand vehicles has definitely seen a rise. More and more people, especially new drivers, are now opting to purchase a second hand car instead of a new one. Because of the saving they can make in the costs difference between an old and a new car. With several leading car manufacturers already retailing in pre-owned cars, the market of second hand cars is only going to rise in the coming years.
When it comes to any vehicle, be it new or pre-owned, insurance is a compulsory requirement as per the rues of the Motor Vehicles Act. Speaking of second hand cars, motor insurance plays a very crucial role in the sale and purchase of these pre-owned vehicles. The aspects of a motor insurance policy, whether it is for a new car or a used car, will remain more or less unchanged. If you are planning on purchasing or selling a pre-owned car, it is imperative that you familiarize yourself with the insurance policy that the vehicle is covered under, the terms and conditions governing the policy, the details involved in the transfer of the policy when required and also the retention of discounts available as per the No-claim Bonus. Considering all these aspects are extremely important in transactions where a pre-owned vehicle is being purchased or sold, not only the buyer but also the seller of such vehicles must pay attention.
For Sellers
When dealing with pre-owned cars, the very first thing which a seller must not forget checking is whether the insurance policy of the vehicle has been transferred from the name of the car’s previous owner to that of the new buyer. No sooner than the insurance policy is transferred from the ex-owner to the new vehicle owner, the seller must claim the vehicle’s No Claim Bonus certificate (in case there is one) from the issuing insurance provide. No-claim Bonus, also called as NCB, is the bonus which policyholders are provided with for every claim-free year. As per a No Claim Bonus, each year which passes without the policyholder making a claim on their motor insurance policy, the insurance provider will give a certain percentage of discount on the insurance premium amount. The percentage of this NCB discount goes up with every successive claim free year. The starting discount is usually 20%, which keeps on increasing with each year and is capped at a maximum of 50%. This means that policyholders can get up to 50% discount on their policy premiums at some stage, which adds up to a lot of cash saving.
The No Claim Bonus is also a time-bound benefit which is limited to a period of 3 years. This means that the seller can only transfer this bonus to the new policy that has been purchased, within a period of 3 years, following which the NCB will no longer be valid. Also to keep in mind, the No Claim Bonus can only be transferred if the buyer is switching from an old insurance provider to a new one. In case the insurance provider is unchanged, transfer of the NO Claim Bonus will not be allowed.
For Buyers
When it comes to the purchase of a pre-owned vehicle, there are several things which buyers must keep in mind. The very first thing to remember is that, following the purchase of a used vehicle, the buyer must transfer of the ownership of the insurance policy in their name within a period of 2 weeks, counting from the day on which the vehicle has been purchased. This is important because, in case the transfer hasn’t been done within the stipulated period of time, the insurance company can reject a claim that may be made in the future. This rule is in accordance with other similar regulations laid down by IRDA (Insurance Regulatory & Development Authority) regarding insurance of used vehicles. As per the rules, insurance providers will not settle any insurance claims where there is a disparity in the name and address details of the vehicle’s insurance or registration certificate.
If you are planning on purchasing a pre-owned vehicle in the future, here is some information regarding motor insurance which can come in handy.
Transferring An Insurance Policy To A New Insurer
In case of the purchase of a second-hand vehicle where the insurance ownership needs to be transferred, the seller of the vehicle must intimate the insurance company about the same. This intimation about the transfer must be done by the seller in writing, in addition to the payment of a nominal fee amount and the pro-rata recovery of the No Claim Bonus, for the period starting from the date the policy has been transferred to the date it stands to expire.
What Constitutes a Motor Insurance Policy
A motor insurance policy will consist of the following:
- A bundled or comprehensive policy which that includes Third Party Cover (compulsory) or Own Damage Cover.
- In case of a Third Party insurance or a Liability Only policy, the policy will not provide cover for the damage that has been caused to the insured vehicle. However, in case of an Own Damage (OD) policy, cover will be provided for the costs of repairing the damage caused to the vehicle or even to the extent of replacing the vehicle.
How Will The Sum Assured Be Calculated
In case of a motor insurance policy, the calculation of the um assured is done taking into account the actual cost of the vehicle along with its IDV (Insured Declared Value). The IDV of the vehicle is determined by taking into account the current value of the vehicle, along with the value of depreciation that is applicable, following the age and usage of the vehicle.
Before You Select a New Insurer
Choosing the right insurer for your vehicle is a very important decision which must not be taken lightly. Given that you will be required to make regular payments towards the policy you choose, ensure that you choose the one that’s not only adequate for your requirement but also one that fits in your budget. There are certain traits which set aside a good insurer from the scores of insurance providers offering policies. The first and foremost is the network of cashless service stations and garage workshops. Choose an insurer which has a wide-spread network located across the country. the other important feature of a good insurer is indicated by their claim settlement record and process, both of which are invaluable qualities for times when a claim requires to be settled.
Factors Affecting Motor Insurance Premiums
Premium charged on an insurance policy will be different for different companies. Some of the primary factors which determine the cost of insurance premiums are the discounts being offered, cost of personal accident cover and difference in the IDV estimation methodology, among others. As a buyer, it is your responsibility to ensure that the car related details, such as the car model type, fuel type, seating capacity, etc., mentioned in the insurance certificate must be the same as those given In the vehicle’s registration certificate and clearance certificate.
Policy Renewal
At the time of policy renewal, the premium for the current year will be lower than the premium charged for the previous year, if no claim has been made on the policy in the past year. If the policyholder has earned a No Claim Bonus, the same will be applied as discount on the current year’s premium.
