Getting motor insurance policy transferred from first owner to second

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 insurer but the vehicle has already changed ownership. 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 a judgement in favour of the insurance company and backed the insurer's decision of not entertaining a claim request in which a second-hand vehicle owner filed for a claim with the insurance policy still in the name of the first owner of the vehicle. 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 is not admissible under the previous owner's policy.

Changes in Motor Vehicles Act

In India, people buying a second-hand vehicle are not much aware of the fact that it is not only very important to get the vehicle registered in their name, but it is also equally important to have the insurance of the vehicle get transferred in their name. With the new Motor Vehicle Act 2019 coming into effect since 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 Rs. 1000. However, with the amendments in the current law, driving without insurance calls for a fine of Rs. 2000. and/or imprisonment up to 3 months for the first offence and fine of Rs. 4000 and/or imprisonment up to 3 months for the second offence. Considering the 100% hike in the penalty for driving a vehicle without valid insurance makes it important to either get insurance transferred to your name while buying a second-hand vehicle, or to buy an altogether new policy which is in your name. It is strongly suggested to opt for second option i.e. buy a new policy as it helps in procuring NCB for the entire period you'll driving your car.

Responsibility of Both Parties

An important fact is that people in India have very less awareness around the importance of getting their vehicle insured under their name when buying a second-hand vehicle. Low awareness around the importance of insurance gives rise to instances of post-loss insurance grievances. Many times, people are not even aware of the process of getting the insurance transferred under their name when buying a second-hand vehicle. Another reality is that it is not just the responsibility of the person who is buying the second-hand car to get the insurance transferred to his/her name. The person selling the vehicle is also equally responsible for getting the insurance transferred in the name of the buyer while transferring the registration certificate of the vehicle. Doing so is important to avoid any kind of legal hassle that may arise due to amendments in the motor vehicle act.

Transferring Motor Insurance Vs Buying a 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 in his or her name by applying to the insurance company within 14 days of the purchase. For the next 14 days, only the third part component of the insurance is transferred under the new owner's name. Now, if within these 14 days, the new owner fails to get the insurance policy transferred in his or her name, the insurance company is not liable to bear any losses incurred due to any accidents or any other damage.

It is quite clear that while transferring the insurance of second hand vehicle, the new owner will only be responsible for damages caused to the vehicle until 14-days, till the insurance is transferred to the new owner's name. However, damages to the third-party will be covered by the insurer. To avoid such a situation, it is better to buy a new policy rather than transferring the old policy in your name. The two major benefits of buying a new policy rather than transferring the old one in your name are first, by buying a new policy you become eligible for NCB and second, the insurer is only responsible for damages caused to the own-vehicle from day one of purchase of the policy.

The writer is business head, motor insurance, Policybazaar.com