On most used car deals the RC transfer gets all the attention. The insurance is treated as something that follows on its own. It partly does, and the part that does not is the part buyers find out about after an accident.
IRDAI's Motor Insurance Handbook is blunt about the risk: registration and insurance of a vehicle should always be in the same name with the same address, otherwise the claim is not payable. This guide covers what the Motor Vehicles Act says, what happens to the no claim bonus, and what a dealer should hand over so the buyer is not caught out.
What Section 157 says
Section 157 of the Motor Vehicles Act, 1988 deals with the transfer of the certificate of insurance. It has two parts:
- Deemed transferWhen the insured owner transfers the car to another person together with the policy, the certificate of insurance and the policy are deemed to be transferred to the new owner from the date of the transfer. An explanation added to the section says this includes the rights and liabilities under the certificate and the policy.
- Fourteen days to applyThe buyer, as the transferee, shall apply to the insurer in the prescribed form within fourteen days from the date of transfer, so the certificate and policy are changed in their favour. The insurer shall then make the changes.
The duty to apply sits with the buyer. In practice the buyer leaves the showroom with a car, a pile of paper and a phone full of messages, and the fourteen days pass. That is why it is worth the dealer's time.
What carries over, and what does not
The deemed transfer protects people the car might hit. In September 2025 the High Court of Madhya Pradesh, applying an earlier Full Bench ruling of that court, held that a policy remains effective for third-party risks even where the transfer was not intimated to the insurer, but not for the transferee's own risks. Courts in different states have taken different views on the finer points, so treat this as the general direction, not a rule for every case.
Damage to the car itself is where the buyer is exposed. IRDAI's handbook says that for comprehensive or package policies, a transfer of ownership has to be recorded within 14 days from the date of transfer, failing which no claim will be payable for own damage to the vehicle. A buyer who skips the endorsement may find the third party covered and their own repair bill refused.
Why the no claim bonus does not move with the car
The no claim bonus is a discount on the own damage part of the premium for claim-free years. IRDAI's handbook puts it at 20% to start, rising to a maximum of 50% with successive claim-free years, and never on the liability premium. It also says plainly that NCB is given to the insured and not to the insured vehicle.
From that, the handbook draws three consequences that matter at the sales desk:
- The policy can go to the buyer, the NCB cannotOn transfer of the vehicle, the policy can be transferred to the new owner but not the NCB.
- The buyer pays the differenceThe new owner pays the difference on account of NCB for the balance of the policy period. The handbook describes this as a pro-rata recovery of NCB from the date of transfer to expiry, along with a nominal transfer fee.
- The seller can keep it, on one conditionThe original owner can use the NCB on a new vehicle, provided they have not transferred the insurance to the buyer of the old car. The insurer has to be told about the sale and the intention to retain the insurance.
So there is a choice to make on every car, and it is better made at purchase than at delivery. Either the existing policy goes to the buyer, who pays back the NCB portion, or the seller keeps the NCB for their next car and the buyer takes a fresh policy. Ask the seller which they want when you buy the car, and note it on the file.
How the transfer is done
The handbook says the insurance can be transferred to the buyer provided the seller informs the insurer in writing, and that a fresh proposal form needs to be filled in. The insurer will have its own list beyond that. Expect it to want the transfer papers and the existing policy. Ask the insurer for the list in writing before the buyer goes, so one visit or one upload is enough.
While the car is in your stock
If you hold a dealer authorisation certificate, the owner hands you the RC, the PUC certificate and the insurance certificate when Form 29C is filed. From then on, Rule 55C makes you the deemed owner, solely responsible for the validity of the car's documents and for all incidents relating to it. The same rule lets you apply for insurance for cars in your possession. Our guide to the dealer authorisation certificate covers the forms.
A policy that expires while the car sits in stock is your problem. IRDAI's handbook notes that a break in insurance means a vehicle inspection before cover restarts, and extra charges. Renew before the expiry date, not after.
What to hand the buyer at delivery
- The policy and the certificateThe current policy schedule and certificate of insurance, with the expiry date pointed out.
- The NCB decision, in writingWhether the policy is being transferred with an NCB recovery, or the seller has kept the NCB and the buyer needs a new policy.
- The transfer papersCopies of the transfer application the insurer will ask for. Our RC transfer guide covers Forms 29 and 30.
- The dateThe date of transfer and the date fourteen days after it, written on the delivery note.
- The insurer's contact and listWho to contact, and the documents that insurer asked for.
- What to carry in the carIRDAI's handbook lists the certificate of insurance, a copy of the RC, the PUC certificate and a copy of the driver's licence.
If the buyer takes a new policy through you, the question goes away: the policy is issued in the buyer's name from the start. Either way, follow up inside the fourteen days. A two-line message to the buyer costs less than the conversation after a refused claim.
Where Kenro Dealership fits
Kenro Dealership tracks insurance as its own part of each deal, with stages, renewals and expiry reminders, and the owner's reports show insurance about to expire across the stock. Each booking is tracked through paperwork to delivery, and deliveries run from a checklist with a named handler, so the policy, the NCB decision and the follow-up are on the car's record rather than in someone's memory. See how loans and insurance run together.
Questions dealers ask
How long does a used car buyer have to transfer the insurance?
Section 157(2) of the Motor Vehicles Act says the transferee shall apply to the insurer within fourteen days from the date of transfer, in the prescribed form, to have the certificate and policy changed in their favour.
Does the no claim bonus transfer to the buyer?
No. IRDAI's Motor Insurance Handbook says NCB is given to the insured and not to the vehicle, so the policy can be transferred to the new owner but not the NCB. The new owner pays the difference for the balance of the policy period.
What happens if the insurance is not transferred within 14 days?
Courts have held that the policy stays effective for third-party risks. IRDAI's handbook says that for comprehensive or package policies, a transfer not recorded within 14 days means no claim is payable for own damage to the vehicle.
Can the seller keep the NCB for their next car?
Yes. IRDAI's handbook says the original owner can use the NCB on a new vehicle, provided the insurance has not been transferred to the buyer, and the insurer has to be told about the sale.