Buying a used car can be a smart financial decision as you get the usage and the value without the steep price tag of a new vehicle. However, the importance of securing the right insurance coverage cannot be overlooked. Along with a thorough checking of service records, ownership details, and overall conditions, the car’s insurance requirements must also be assessed. It is all the more important because car insurance coverage for a used vehicle can differ from that for new models.
Knowing the viable coverage options, regulatory requirements, and documentation process can allow you to make a smooth transition into vehicle ownership.
With that in mind, this guide explores the types of insurance available for used vehicles, along with factors to be aware of while carrying out the transfer.
Types of Car Insurance Coverage Available for Used Cars
There are mainly three types of car insurance available for used cars, which are as follows:
- Third-Party Car Insurance
Third-party car insurance is mandated by Indian laws. Every car owner driving their car on Indian roads should have this policy. It provides coverage for third-party injury or property damage that occurs due to your car. However, it does not provide protection for damage to your own car.
- Own Damage Cover Insurance
An own damage car insurance policy is preferred among individuals who already have third-party insurance. It protects your car from theft, accidents, and riots.
- Comprehensive Car Insurance
A comprehensive car insurance plan bundles both third-party and own-damage protection. It provides coverage for your car against natural disasters, theft, and accidents. These policies also allow policyholders to get a No Claim Bonus (NCB) if no claims have been made in a policy year.
Transfer of Insurance Policy After Purchase
When you purchase a used car, the first thing to do is transfer the existing insurance policy to your name. You can also take help from experts to make a smooth shift of car ownership and motor insurance policy documentation. Here are a few factors to keep in mind, in case of a purchase of a pre-owned vehicle:
- The insurance policy must be updated to the new owner’s name.
- You may need to set a new deductible for the used vehicle.
- The transfer should be done within the specified time frame provided by the car dealer.
Policy Documentation
When buying a used vehicle, both the car owner and the dealer need to fill out certain paperwork to keep the car ownership records in order. In this aspect, some of the common documents required for the purchase of a car insurance policy for pre-owned vehicles are as follows:
- Copy of the sale agreement
- Updated Registration Certificate (RC)
- Proof of RC transfer
- Previous insurance policy document
- The new owner’s identity and address proof
- Completed insurance transfer application form
Inspect Existing Policy
Before you finalise the purchase, review the car’s existing insurance policy. Some of the main points to look at are as follows:
- Review the coverage thoroughly.
- Check the policy’s validity period.
- Review previous claim history.
- Confirm the current IDV.
- Verify included add-ons.
- Make sure there are no pending claims.
No Claim Bonus (NCB) in Used Car Insurance
The NCB belongs to the policyholder and not the vehicle itself. If you already have a car and have replaced it with the pre-owned vehicle, then your accumulated bonus from the previous car’s policy may be applicable. However, if you are buying a vehicle for the first time, the NCB record will start fresh. Note that:
- The previous owner retains their accumulated NCB.
- The buyer cannot use the seller’s NCB.
Add-ons Worth Considering for a Used Car
As the vehicle has been used for quite some time, you may need to add a few valuable add-ons for better financial protection. Some of the popular add-ons* for used vehicles are as follows:
- Engine Protection Cover:Acts as a financial safety net for your vehicle’s engine repairs and covers engine and related components which may not be covered under standard plans in case of aggregation of losses.
- Roadside Assistance Cover:It provides assistance if your car breaks down. Some of the covered services under this add-on include towing services and flat tyre assistance.
The availability of add-ons* depends on the insurer. It is recommended to review your needs and opt for only those add-ons that are necessary.
Final Thoughts
The purchase of a used vehicle is connected with many factors, and car insurance is one of them. As the buyer, you must remember to check the right insurance type, evaluate the required documents for policy transfer, and check the current policy. This will allow you to make a smooth transition for policy ownership of the pre-owned vehicle, and you will be able to take your car on the road with complete peace of mind.
*Add-ons are subject to payment of an additional premium.
The above information is for educational purposes only. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.
