Transfer of Motor Insurance When Selling a Vehicle
When you sell your car or bike, it’s not just the Registration Certificate (RC) that needs updating—the motor insurance policy also requires proper transfer. Many people overlook this step, leading to claim disputes and legal complications.
The IC-72 study text makes it clear that motor insurance is a personal contract, and ownership changes require careful handling.
⚖️ Legal Provisions (Section 157 of MV Act, 1988)
Automatic Transfer of Third-Party Insurance
On sale of a vehicle, the Third-Party (TP) cover automatically transfers to the buyer from the date of ownership transfer .
This ensures that innocent third-party victims are not left without protection.
Own Damage (OD) Cover Not Automatic
The OD section (damage to the vehicle itself) does not transfer automatically.
Buyer must apply to the insurer within 14 days of transfer to endorse the policy in their name .
Mandatory Intimation
The transferee (buyer) must inform the insurer in writing within 14 days, requesting name change in the Certificate of Insurance .
If this is not done, the insurer may reject OD claims, though TP liability remains covered.
🚗 Practical Scenarios
Case 1: Seller forgets to transfer policy
Mr. A sells his car to Mr. B but forgets to transfer insurance. Mr. B meets with an accident.TP victims are compensated (automatic transfer).
But OD claim is rejected since Mr. B’s name was not endorsed in policy .
Case 2: Buyer delays intimation
If the buyer doesn’t inform insurer within 14 days, TP claims will still be honored, but OD section won’t apply until endorsement is made.Case 3: NCB (No Claim Bonus) Transfer
NCB belongs to the insured, not the vehicle.
Seller can retain and transfer NCB to their new vehicle policy .
Buyer does not get seller’s NCB, but starts afresh.
✅ Steps for Smooth Transfer
Seller hands over:
Policy copy, RC, and Forms 28/29/30.
Buyer submits to insurer:
Transfer application + copy of RC transfer + fee.
Insurer issues endorsement with buyer’s name.
Seller applies separately to retain NCB for new vehicle.
⚠️ Risks of Not Transferring Insurance
Seller Liability: If buyer causes an accident and policy is still in seller’s name, seller may face legal notices.
Buyer Loss: OD claims may be rejected if policy not endorsed.
NCB Forfeiture: Seller may lose valuable NCB if not claimed within 3 years of sale .
🎯 Conclusion
Transferring motor insurance is as important as transferring RC.
Third-Party cover auto transfers, but
Own Damage cover requires application within 14 days.
👉 Pitch Line for Agents:
“When you sell your car, don’t forget to transfer the insurance. A small step today prevents big disputes tomorrow.”