Thinking of getting a car, but not getting your choice of car within your budget? Consider getting a used car instead of buying a brand new one. With cars becoming an essential item for commuting, purchasing second hand cars has become extremely popular of late. People can have their choice of car in their affordable range.
While buying and selling of a used car, one of the main things to consider is car insurance. There are a lot of things associated with car insurance like the policy terms and conditions, ways of transferring the policy, retaining the no claims bonus discounts, etc. Taking care in understanding these nuances can prove to be extremely beneficial for both the buyer and the seller of a used car.
In this blog, we have listed some of the important aspects of insurance during the buying or selling of a used car to work as a checklist for you.
- Important Things to Know About Transferring Motor Insurance
- Transferring the Ownership of Policy
- Know the No-Claim Bonus
- Things Included in Motor Insurance Policy
- Selecting the Insurance Company
- Sum Assured Calculation
- Premium Calculation
- Renewal of Car Insurance Policy
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Important Things to Know About Transferring Motor Insurance
Following are the things to remember with regards to transferring a motor insurance policy:
Transferring the Ownership of Policy
If you are the seller, do check and recheck whether the policy has been transferred in the buyer’s favour. Claim the certificate of no claim bonus from the insurance company immediately after the policy is transferred. If you are the buyer, you need to know that the ownership of the insurance policy needs to be transferred into your name within two weeks of purchasing the vehicle. Post two weeks, there is a chance that any claim can be rejected. As per IRDA rules, insurance claims will not be settled if the policy and the registration of the vehicle are not in the same name and address.
For transferring an insurance policy, the seller has to communicate the same to the insurance company in writing. The seller has to further pay a pro-rata charge for recovery of the no claim bonus from the transfer date till the policy expiry date.
Know the No-Claim Bonus
No claim bonus is the bonus that a policyholder enjoys once the policy passes through a claim free year. The benefit of no claim bonus varies between 20% to 50%, depending on the number of claim free years of the policy. Although a policy can be transferred, the no claim bonus cannot be transferred to another name. No claim bonus has to be claimed within three years of purchasing a policy. No claims bonuses can be transferred to a different insurance company, in case the owner switches the insurer.
Things Included in Motor Insurance Policy
For transferring an insurance policy, both the buyer and the seller need to know the various components of the insurance policy.
Selecting the Insurance Company
Finding a good and trustworthy insurance company is one of the most important aspects of purchasing a motor insurance policy. The insurance company should have a vast network of service stations and garages which provide cashless services. The insurer should also have a good and a quick claim settlement record.
Sum Assured Calculation
For motor insurance policies, the sum assured is calculated as per the worth of the car and the Insured Declared Value (IDV). The IDV of a vehicle is calculated on the basis of the current value and depreciation value.
The premium amount of a vehicle insurance varies from one company to another. There are several factors which affect the premium of a motor insurance policy, most important of which are the IDV estimation methodology, personal accident cover, discounts offered, etc. Keep in mind that the details of your vehicle included in the insurance policy like seating capacity, fuel type, model type, clearance certificate, etc. should match with the details mentioned in the registration certificate of the vehicle.
Some insurance agents suggest to under-declare the Insured Declared Value for reducing the premium. This might seem to be profitable in the short term, but in the long term, it is harmful. Reducing the IDV results in a lower amount of sum assured which will have negative impacts during a claim. Even if your claim deserves a higher settlement, it won’t be done since the declared IDV is lower. Hence, this practice is definitely not suggested. The premium amount on personal accident cover remains more or less the same across all insurance companies.
Renewal of Car Insurance Policy
If no claims have been made by the policyholder, the premium paid will lessen every year during the renewal. In case, any no claim bonus is earned by the policyholder, the premiums will keep reducing, the conditions for the premium remaining the same.
Keeping the above things in mind is crucial while purchasing a used car. This will help you avoid any sudden surprises while making a claim. Browse through our website to know more about different aspects of insurance, not just vehicle, but all kinds.