Updated on 10-04-2025
Are you excited to sell your car and upgrade to a better model? That’s wonderful, however, selling a car comes with an additional set of responsibilities! While you may be focusing a lot on buying your new car, there are a few things you have to consider in regard to selling your old one.
You need to ensure that you transfer your motor insurance policy and other documents in the right manner to avoid any issues that may arise in the future. Here’s what you need to know for a smooth handover.
How to Transfer Car Insurance from One Person to Another In India?
You will continue to be held responsible for any liability related to the car, even after you sell it if you don’t follow the proper documentation process. To free yourself of future liabilities associated with your car, you need to pay attention to two aspects of the process: Transactional and RTO paperwork.
Here are the key steps to follow:
- Inform the Insurance Company: Once the sale is finalised, the seller must inform the insurance company about the change in ownership and request for policy transfer.
- Obtain a New Registration Certificate (RC): The new owner must obtain the updated RC in their name from the Regional Transport Office (RTO).
- Submit the Required Forms: The seller needs to fill out and submit Form 29 (Notice of Transfer of Ownership) and Form 30 (Report of Transfer of Ownership) to the RTO and insurance provider.
- Provide Necessary Documents: Both the seller and buyer must submit the required documents for the insurance transfer (listed in the next section).
- Vehicle Inspection (If Required): Some insurance companies may require an inspection of the vehicle before approving the policy transfer.
- Pay the Transfer Fee: The buyer may need to pay a nominal fee for the insurance policy transfer.
- Receive the Transferred Policy: After verification, the insurer will issue a new policy document in the name of the new owner.
It is advisable to complete this process within 14 days of the sale to ensure uninterrupted insurance coverage.
Documents Required to Transfer Car Insurance to New Owner
Once you’ve finalized the deal with the prospective buyer, you should get a sale affidavit and delivery note signed by them. Make sure to attach the prospective buyer’s identity proof and address proof like PAN Card and Aadhaar Card. Don’t forget to attach the cheques that you are receiving as the payment to the sale affidavit. It’s essential to get the sale affidavit notarised and signed as it acts as an agreement transferring all vehicle-related liabilities to the buyer.
Here are the important car insurance transfer forms required by the RTO.
- Form no. 28
This is an application for receiving an NOC from the registering authority. This is essential as it acts as proof that you have no unresolved liabilities or obligations related to the vehicle.
- Form No. 29
This form acts as a notice to the RTO that the vehicle is being sold by the owner and that all required documents have been handed over to the buyer.
- Form No. 30
This form acts as a confirmation of form no. 29.
- Clearance Certificate
The clearance certificate is a simple application made to the RTO, informing them that your vehicle has been sold. It includes the details of the buyer, seller, and the vehicle.
No Claims Bonus in Car Insurance Transfer
The No Claim Bonus (NCB) is a discount offered to policyholders who have not made any insurance claims during the policy term. It helps reduce the premium for the next policy renewal. However, the NCB is associated with the policyholder, not the vehicle.
When selling a car, the NCB does not transfer to the new owner. Instead, the seller can retain it and use it for their new vehicle’s insurance. The buyer will have to build their own NCB from scratch.
Documents Required for NCB Retention Letter
To retain the NCB when selling your car, you must obtain an NCB retention letter from your insurer. The required documents include:
- Sale Agreement: Proof that the vehicle has been sold.
- Request Letter for NCB Retention: A formal request to the insurer.
- Copy of the Existing Policy: The current insurance policy of the sold vehicle.
- Delivery Note: Proof the vehicle has been handed over to the new owner.
- Cancelled Insurance Policy: Some insurers may require the previous policy to be officially cancelled before issuing an NCB retention letter.
Once the insurer issues the retention letter, the seller can use the accumulated NCB for insuring their new vehicle.
Can No Claim Bonus Be Transferred to the New Car Owner?
No, the No Claim Bonus is tied to the policyholder, not the vehicle. It cannot be transferred to the new car owner. The buyer must start from zero and build their NCB over time by maintaining a claim-free record.
However, if the seller purchases a new vehicle, they can apply the retained NCB to the new insurance policy, reducing their premium cost.
What Happens if the Car Insurance Transfer Remains Incomplete?
Failing to transfer the car insurance policy can lead to several complications:
- Claim Rejection: If the new owner files a claim without transferring the insurance, the insurer may reject it due to a mismatch in ownership details.
- Legal Liabilities: The original owner may still be held liable for any accidents or damages caused by the vehicle.
- Policy Lapse: Without a transfer, the existing policy may become void, leaving the vehicle uninsured.
- Traffic Penalties: Driving a vehicle with an insurance policy under a different name can lead to legal penalties.
To avoid these issues, ensure the insurance policy is transferred to the new owner immediately.
Why Do You Need to Transfer Car Insurance?
The buyer doesn’t have to take a fresh policy for the car; you can simply transfer your existing policy to them when you’re selling a car to them. Vehicle insurance transfer will also rid you of any legal issues that may crop up later. You must fill out a fresh proposal form and submit it to the insurance company. Attach all the documents listed above, as well as the previous policy. On receiving these documents, the insurance company will pass the endorsement of the transfer. The entire activity must be completed within a period of 14 days. Now you know the steps you need to go through for a hassle-free handover of your car and its policy cover. As important as it is to transfer your old car’s policy, it’s also crucial to get insurance coverage for your brand-new ride.
FAQs
1. Can I transfer my No Claim Bonus to another person?
No, the No Claim Bonus is non-transferable and belongs exclusively to the original policyholder.
2. Can I transfer RC without transferring vehicle insurance?
No, you need a vehicle insurance policy for transferring the RC to the new owner, because the insurance policy is required by RTO for the transfer of the RC.
3. How long does it take to transfer vehicle RC?
It can take 20 to 60 days to complete an RC transfer, depending upon the procedure and requirements of the RTO.
4. Can I drive the car immediately after buying it if the insurance transfer is pending?
Yes, but only for 14 days. After that, the new owner must complete the insurance transfer to avoid driving an uninsured vehicle.
5. What happens if the buyer does not transfer the insurance?
The existing policy may become void, leading to legal and financial complications for both parties.
6. Can I cancel my car insurance after selling my car?
Yes, once the transfer is complete, or if you choose not to transfer, you can cancel the policy and apply for an NCB retention letter.
7. Can I get an NOC online?
Yes, you can get an NOC from the RTO online through Form 28. After submitting the form and related documents with the RTO, you can easily obtain an NOC for selling your car.
8. What is the cost of transferring vehicle ownership?
The vehicle ownership transfer fee is different for each state. In Delhi, it is 300-500 rupees; in Maharashtra, it is 530 rupees.
Conclusion
Transferring car insurance is an important step in the vehicle sale process. It ensures the new owner remains protected while saving the previous owner from future liabilities.
By following the outlined steps and ensuring all necessary documents are in place, buyers and sellers can have a smooth transition without legal or financial complications. Always check with your insurance provider while buying car insurance online for specific requirements and guidelines to avoid any last-minute issues. If you plan to sell your car, don’t overlook the insurance transfer—it is as important as the sale itself!
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.