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All You Need To Know About Hypothecation In Car Insurance

When you buy a car with a bank loan, the vehicle is registered in your name at the local Regional Transport Office (RTO). The Registration Certificate (RC) will also include your name even though the bank provided the financing. The RTO will, however, note in the RC that your car has been hypothecated in favour of the relevant bank.

How Do I Include Hypothecation In My Car Insurance?

The general insurance provider will note that the vehicle is hypothecated in the policy document whether you are financing a new or used car purchase. You will be asked if the car is fully funded or paid for when renewing the policy with a different insurance provider.

Required Documents For Vehicle Hypothecation

The following documents must be submitted when registering a vehicle that is hypothecated through a bank:

  • Certificate of Original Registration.
  • Form 34, which serves as the vehicle hypothecation application.
  • Legal car insurance
  • Proof of the car owner’s address.
  • Pollution Under Control Certificate (PUC).
  • Receipt of the fee for the RTO’s endorsement of the hypothecation.
  • PAN card of the car owner, attested.     *

How Can Hypothecation Be Removed From A Car Insurance Policy? 

Step 1: Cancel The Vehicle Hypothecation

Only after the car loan is paid off can the hypothecation on your vehicle be released. You must fully repay the loan before you can begin the removal from the RC process. According to the bank’s records, there should be no balance against your requested loan. You can pre-close the loan or make payments at the end of the loan term. 

Step 2: Delivering Documents To The RTO

The bank will issue the following documents to release the hypothecation on your car once the vehicle loan has been repaid. The following paperwork is needed for cancellation:

  • No Objection Certificate (NOC): The NOC attests to the successful conclusion of the hypothecation contract between the bank and the owner of the loan account. The RTO will need this document to cancel the note on the RC.
  • Form 35: This document serves as a request for the RTO to revoke the hypothecation. Additionally, this Form attests to the completion of the loan between you and the bank.
  • Valid Insurance Policy: To terminate the hypothecation on your car, you must provide a valid car insurance policy. This policy must have car insurance coverage
  • Pollution Under Control Certificate (PUC): To remove or cancel the hypothecation on your vehicle, the RTO also needs the PUC certificate.

Step 3: Submitting The Application For Hypothecation Removal

After receiving the documents from the lender or the bank, you must visit the appropriate RTO to submit the documents to cancel the hypothecation. Once you have submitted all the necessary paperwork and paid the required RTO fees, the officer will start the removal process.

Step 4: Cost Of Hypothecation Cancellation

You must pay the RTO fee for the hypothecation on your vehicle to be cancelled. In the nation, the fees differ between the states. To know the required price for your state, go to the website of the relevant RTO or the transport department.

*Standard T&C Apply

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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