Shopping is fun. Research, budgets, recommendations, comparisons and a little bit of dreaming about how happy we will be once we own it.
Selling can be interesting too. In addition to the age-old Indian tradition of bargaining, some aspects require extra care and involvement when you sell your old vehicle.
Praise it to the skies, haggle for the best price, and be sure you know what to do with its insurance policy as well.
Vehicle insurance, as you would have read in this column, is of two kinds — Third-party liability and Own Damage. When you sell a vehicle, you may be in the middle of your policy period. That is, the policy is still valid and the renewal is a way off.
When you sell your car, you sign some Road Transport Authority (RTO) forms (Form 29 and 30) favouring the buyer. In addition, you have to give the buyer a letter addressed to your insurance company quoting your policy details and the buyer’s details, stating that you have sold the vehicle to a specified person and that the policy may be transferred in his favour.
By the way, you should consider the cost of the unused portion of the policy that you are transferring to your buyer and build it into your selling price. For example, if you have just renewed your insurance, we are speaking of almost a year’s insurance premium. Once sold, send a copy of the insurance no objection letter and photocopies of the dated, filled in and signed RTO forms to your insurance company and ensure you get an acknowledgement. Another set should go to your RTO as well for prudence.
As for the buyer, he will present these forms and your letter to the insurance company and transfer the vehicle ownership so that the registration certificate (RC) would bear his name. Once this is done, he can approach your insurance company and, on the basis of your letter to your insurer, get the policy also transferred to his name.
Why the fuss? Aren’t you done with this transaction once the money is in your bank and you have handed over the keys and RC?
Not quite. It is your legal responsibility to ensure that the insurance is transferred to the name of the buyer.
When you sell the vehicle, the TP liability cover is valid for an interim period of 15 days under the Motor Vehicles Act, 1988, to tide over the time needed for the actual transfer. After this, the policy has to be formally transferred to the new owner for coverage to be valid.
A vehicle and its insurance papers should reflect the same name and address. If not, you can be held liable for any accidents that the vehicle may be involved in since the insurance policy records show your name and that will be used for official communication in case of any legal proceedings.
Let us cycle back and look at the name transfer of the vehicle itself. If your buyer does not transfer the vehicle to his name and continues to use it, any liability will be squarely on your shoulders. One way to lock the buyer into transferring the vehicle to his name is to date the Forms 29 and 30 as their validity is only for 15 days from that date. In addition, you are going to send copies to the RTO and the insurance company, remember? I have known buyers and intermediaries who stiffly object to dating the RTO forms ‘for convenience’ and also cases of buyers who use the vehicle for a few years and sell it on further to others – still in the seller’s name.
The chilling thing is liability can be related not only to accidents, but also to any nefarious use the vehicle is put to!
I know that takes some fun out of selling and getting money, but you would sleep better at night, right?
(The writer is a business journalist specialising in insurance & corporate history)