Insurance companies often come across instances of
second hand car
insurance claims,
where the new owner claims for damages to the vehicle without having
transferred the insurance policy in his name after the purchase. The claim
however is not admissible in the absence of a valid contract between the
insurance company and the new owner of the vehicle. In a recent case, the Pune
Consumer Court ruled in favour of the insurance company and upheld the
insurer's decision of not paying the claim to a second hand vehicle owner since
he had not transferred the insurance policy to his name. The Court ruled that
an insurance policy is a contract between a policy holder and an insurer. In
the absence of the new vehicle owner's name on the motor insurance policy,
there exists no valid contract between him and the insurance company. Hence any
accidental damage suffered by the new owner is not admissible under the
previous policy.
Owing to low awareness on insurance amongst the general public
instances of post loss insurance grievances in such scenarios are common place
in India. Hence it is important for individuals who have purchased or are
looking at buying a second hand vehicle, to know that transfer of insurance is
an equally critical aspect of the buying process and should not be ignored or
procrastinated. Also, the individuals who sell their vehicle have an equal
responsibility to ensure that the insurance is transferred in the new owners
name to avoid any legal hassles that may arise in the future. Here we shall
explain how not transferring of insurance will impact both the buyer and the
seller of the motor vehicle. We shall also demystify for you the procedure of
ensuring a seamless insurance transfer.
To begin with it is important to understand the structure of a
motor insurance policy. A comprehensive motor insurance policy comprises of two
parts - Own Damage (OD) and Third Party (TP). Whereas TP section covers damages
caused by your vehicle to a third person and are mandated by law, OD section
covers damages caused to your vehicle owing to any accidental mishap. After
purchasing a used car, Section 157 of the Motor Vehicle Act casts a duty on the
new vehicle owner to get the insurance policy transferred in his name by
applying to the insurance company within the first 14 days. For these 14 days,
only the "Third Party" section of the insurance policy gets
automatically transferred. However, it does not apply to the Own Damage section
of the policy. The "Own Damage" section will be transferred only
after the insurance policy gets registered under the new owner's name. Post
this 14 day period, if the new owner fails to get the insurance policy
transferred in his/her name the insurance company is not liable to bear any
losses incurred by new owner in either of the TP/OD sections.
If the insurance is not transferred and the policy still bears the
name of the first owner, in case of an accident the claim for damages to the
vehicle or third party will not be paid by the insurance company. Moreover, the
court may also send the first owner a notice to compensate for the loss caused
to a third party, for an accident caused by the new owner. The whole process of
establishing the proofs of sale, the transfer of vehicle RC etc. by the
previous owner can be a grueling exercise. This can be easily avoided if both
as a seller and a buyer of a second hand vehicle, one insists on getting the
insurance policy transferred to the new owner's name immediately after the sale
deed is finalized.
