In our country, it is mandatory as per law to have car insurance if you own a car. It is a must to have your car insurance documents before you take your car out for a stroll, failing which you may bear some serious implications like a heavy fine or other legal penalties. Hence you must also keep a copy of the car insurance papers in your car.
Car insurance is compulsory in both the cases – buying a new car as well as a second-hand car. In the case of latter, the car insurance policy must be owned by the new owner of the car. If you are selling your used car to a buyer, there are two options for you:
- First, you can transfer your car insurance papers in the name of the buyer or the new car owner if the buyer agrees to do so.
- Secondly, you can cancel your car insurance policy midway, claim the amount and the buyer can apply for a new car insurance policy on his name. Let us discuss this one by one.
Transferring the Car insurance in the buyer’s name
Before the transfer of papers, the buyer of the car needs to understand the kind of insurance policy of the car and other terms and conditions. The seller must know the details regarding No Claim Bonus discounts etc. He must also make sure that the policy is correctly transferred in the buyer’s name to avoid confusion and legal complications later.
The buyers must know that he must get the car insurance policy transferred in his name within the first two weeks of buying a car. If he does not do so, he may be at a risk of rejection of the insurance claim. Also, it is important that the car insurance and registration of the vehicle must carry the same name and address.
To transfer the car insurance policy in the name of a buyer, the seller must notify his insurance company along with submitting the fees of transfer and pro-rata recovery of NCB. The details that may be required to be shared with the insurance company to transfer insurance paper in new name are the following:
- Car plate number
- Model and make of the car
- Contact details of the seller
- Contact details of the buyer
- License number of the seller
- License number of the buyer
- The price of sale
- Date of sale
Also, after transferring the car insurance policy, the No Claim Bonus (NCB) must be claimed by the seller from the insurance company in case the seller has not claimed any insurance amount in. NCB cannot be transferred by the seller to the buyer as per the car insurance rules.
Cancelling the car insurance policy
If you have decided to cancel your car insurance policy while selling your car, you are eligible for a refund from the insurance company. The insurance company may charge you some amount of the premium for cancellation, depending how old your car insurance policy is. Generally, the percentage of premium charged is 10% if you do the cancellations within first month, 20% within the second month and so on. If your car insurance policy has already crossed eight months, you will not be able to cancel the policy.
You must write a self-attested letter to your car insurance company regarding the cancellation of the policy. After processing your request, the car insurance company will give you a letter confirming the cancellation and your remaining amount after adjusting your car insurance premium with the cancellation charges.