Car Insurance Transfer: What Is It, Why It Is Important, And How It Works

Berry Mathew

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Car Insurance Transfer: What Is It, Why It Is Important, And How It Works

Nowadays, owning a car is more than just a matter of status. Especially given the state of public transportation, many people now prefer a car for a safe trip to and from their workplace. According to statistics, the market for used cars in India, which was worth $32.14 billion in 2021, is projected to grow to $74.70 billion by 2027 (Source: Mordor Intelligence). Car ownership is much more complex than just making the payment and receiving the keys.

When it comes to the paperwork associated with car ownership, whether it is car insurance or anything else—you must take everything into account. Here’s all you need to know. 

What is a transfer of car insurance policy?

As the name implies, this is the procedure for transferring ownership of a car insurance policy from the previous owner to the new owner. This is an essential process both at the time of buying and selling a car. In simple words, it is a legal arrangement that transfers ownership from the seller to the buyer. 

As per Section 157 of the Motor Vehicles Act, both the buyer and the seller must transfer the insurance policy within 14 days from the purchase date (Source: Indian Kanoon).

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Importance of transfer of car insurance policy

According to the rules set by the IRDAI, the name, as well as the address on the registration certificate, must match the ones mentioned on the car insurance policy. This means that even if you are the registered owner of the vehicle, you cannot submit a claim against an existing insurance policy if it is not in your name. 

As it is a legal agreement between two parties, owner names and addresses are crucial for settling disputes. Therefore, whether it’s a comprehensive car insurance policy or a third-party policy at the time of purchase, ensure that the existing policy is correctly transferred to your name.

Situations where car insurance transfer is necessary

Situation 1: Buying a second-hand car

If you’ve decided to buy a second-hand car, don’t forget to talk to the owner about the transfer of ownership and insurance. Before buying the car, enquire the seller about the vehicle’s mileage and kilometres run. After you’ve agreed on a price, you can request to have the registration certificate transferred to your name. This procedure often takes up to a month, after which you can request the transfer of the car insurance policy. 

Situation 2: Selling your car

Imagine that you have decided to sell your three-year-old car. The insurance policy for the car you are selling is valid and good for another year.

Once a potential buyer has been identified, you will have to transfer the registration certificate of the vehicle accordingly. Buyers often believe that the policy transfer takes place automatically. Sadly, this is not the case. To transfer the legal liability from one owner to the other, car insurance providers must be informed separately. The responsibility to transfer the car insurance policy as soon as possible after the sale of the car completely falls upon both the buyer and the seller.

The transfer of the insurance policy may take up to 30 days, depending on how quickly the submitted documents are verified.

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Procedure for car insurance policy transfer 

To transfer your comprehensive car insurance successfully, you must pay a transfer fee and submit the documents mentioned below:

  • An application form
  • Form 29 and Form 30
  • No Objection Certificate from the owner 
  • An inspection report issued by the insurer 
  • New Registration Certificate

Once the necessary paperwork and the fee have been received, the insurance provider will initiate the transfer of insurance and mail the new policy with a change of name.

No Claims Bonus (NCB) in car insurance transfer 

When selling a car, the former owner transfers the registration and insurance to the buyer. However, the No Claims Bonus or NCB is a significant exception to the car insurance transfer process. 

The No Claims Bonus is a reward given by insurance companies to safe drivers for not filing any claims throughout their policy year. Your renewal premiums can be decreased using the NCB percentage. In fact, the more the number of consecutive claim-free years, the more will be the discount/benefit acquired.

If a particular insurance policy is transferred to a new vehicle, an NCB retention letter must be presented to the new insurer to retain the accumulated NCB. By submitting the letter, the former policyholder becomes qualified for an NCB discount on the premiums of the insurance policy of the new car.

What happens if the insurance transfer is not completed?

If a car insurance transfer isn’t completed, two things can happen:

  1. If the existing insurance policy of your second-hand car is not transferred to your name, you won’t be able to file any insurance claims. This means that regardless of whether your car is damaged or not, you are held liable for third-party damages and you will not be able to file a claim. 
  2. If you do not transfer the comprehensive car insurance to the new owner of the car, the Motor Accidents Claims Tribunal might instruct you to pay for the damages brought on by the new owner.


Now, you are familiar with what a car insurance transfer is and how to transfer it from one person to another. Additionally, you are also aware of the significance of transferring comprehensive car insurance in the first place. Investing in a new asset involves extensive planning. Therefore, it is crucial to follow all the relevant procedures to ensure the ownership transfer happens correctly. Also, it is imperative to execute such transfers properly as failing to do so might result in legal trouble.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.