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What Happens to the Insurance Policy When a Car is Sold?

Source : SIFY
Last Updated: Tue, Nov 27, 2012 08:55 hrs
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As we all know, getting your car insured is compulsory. Therefore every car literally comes with an insurance policy. Not only is it illegal to drive a car without insurance, it is extremely foolish as well. This is because an insurance policy covers your car against damages and you get to drive it without any hassle. But what happens when you sell your car? Would you have to pay the premiums even when the ownership of the car is no longer in your name? Or could you just forget about the policy since you longer have the car with you? If you have been seeking answers to these commonly asked questions, read this article and find out what exactly happens to the insurance policy when you sell your car.

myinsuranceclub.com

Options

When a car is sold, there are quite a few choices that you have- you can cancel the existing Car Insurance Policy that you have, transfer it to the buyer (new owner of the car) or transfer it to your new car. All of these options come with different clauses and you must understand them before you make a deal.

  1. Cancelling the policy - Once you decide to sell your car, you can cancel the insurance policy. You will be refunded for the period that remains un-expired. However to qualify for this, you have to ensure that you didn't make any claim. The no-claims bonus can be retained and later transferred to a new policy when you purchase a new vehicle.

  2. Transferring the ownership of the policy - The insurance policy can be transferred to the new owner of the car. To do this, the buyer has to send an application with the details of the policy and the sale (of the vehicle) to the insurance company. Once analyzed and approved by the insurer, the policy will be transferred to the new owner of the car. The new policyholder however won't be eligible for the no-claims bonus. The seller of the car retains the bonus.

  3. Transferring the policy to a new vehicle - The third option is to transfer the policy to a new car that you purchase. This means that when you get your new car, rather than going for a fresh insurance policy, you can continue with the existing policy (you had for your old car). There will be adjustments made by the insurance company and you may have to pay a higher premium if the car is of a higher price, etc. The no-claims bonus from your previous policy can be added on to the new policy.

As soon as you decide to sell your car, inform your insurer. The insurer will instruct you how to transfer or cancel your policy. Do the needful and do not let the policy lapse. You must be very careful to ensure that your motor insurance policy doesn't lapse. Policyholders often make the mistake of leaving the policy alone once the car is sold. Do not do this as it can prove to be very harmful as not only will your premium pile and policy lapse, you will find it very difficult to buy a new policy when you need to.

As soon as you decide to sell your car, inform your insurer. The insurer will instruct you how to transfer or cancel your policy. Do the needful and do not let the policy lapse. You must be very careful to ensure that your motor insurance policy doesn't lapse. Policyholders often make the mistake of leaving the policy alone once the car is sold. Do not do this as it can prove to be very harmful as not only will your premium pile and policy lapse, you will find it very difficult to buy a new policy when you need to.

Deepak Yohannan

Deepak

The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal

For more articles by Deepak Yohannan, please visit MyInsuranceClub.com

You may write to the author at Deepak@myinsuranceclub.com

 




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