Roles of insurance in trading a used car
There are many who buy a used car. Many prefer it to buying a new car as it saves them money. A used car makes an excellent value proposition for many people as compared to a new car. However, just like for a new car, a used one also needs insurance policy to support it. In addition, it is important that both the buyer and seller of the vehicle is knowledgeable about the insurance policy and its conditions. If one neglects the terms related to the transfer of the insurance policy during a sale or purchase, it can get complicated and may incur additional expenses for both parties.
Interested to check out some crucial aspects of an insurance policy in selling or buying a used car? Then read on and be informed
1 – Ownership transfer:
While selling the car, the seller should verify if the insurance policy has been transferred in the name of the vehicle buyer. On the other hand, the buyer should note that he/she gets a time period of 2 weeks at least to acquire the insurance ownership.
Delaying may result in policy rejection, and the buyer will have to reapply for a policy afresh in that case. Another thing to note is that any claims based on the policy are not viable if the vehicle registration is not in the same address and name as given on the policy document. Make sure that you are aware of these IRDAI norms so that you can expect to get claims approved and not get rejected because of this one point.
2 – NCB claims:
Any claim free year results in additional bonus, which we term as No-claim bonus. This benefit can vary from 20-50% based on the number of claim-free years acquired. While the seller can transfer an insurance policy for a used car, the NCB is not transferable as it stays with the policyholder rather than with the policy.
It is interesting to note that if the seller has not claimed any bonuses for a year, then that benefit is aggregated for later use when he plans to buy a new vehicle. In short, NCB stays with the policyholder rather than with the car.
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3 – Policy period:
Another role of insurance policies, when transferring it to the buyer, is that its margin can be adjusted in the cost of the vehicle. This factor is based on the date on which the policy was purchased. For example, if the seller buyers an insurance policy in January 2017 and sells the car around March 2017 to the buyer, then it is clear that the seller has already made the payment for the policy at least for January 2018. This gives him the right to add the cost of the remaining premium months in the car’s price.
Buying or selling a used car requires better understanding of the documents that accompany when trading. Both the buyer and the seller should be full alert about the exchange of ownership and the documents before proceeding.
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