Demystifying Hypothecation In Car Insurance: What You Need To Know

Car Insurance

 Third-party car insurance is mandated by the Motor Vehicles Act of 1988 in India. There are two main types of insurance: comprehensive and third-party liability. Comprehensive coverage includes personal accidents, third-party liabilities, and vehicle damage. Third-party insurance specifically covers damages to a third party, offering essential protection for drivers. You can use a car insurance premium calculator to estimate the costs of premiums to be paid. *

Opting for a zero depreciation cover in car insurance provides comprehensive coverage for your vehicle, ensuring minimal depreciation deductions in case of a claim. Claims are subject to terms and conditions set forth under the motor insurance policy. *

Hypothecation In Car Insurance: Definition And Significance


Hypothecation in online car insurance refers to using the vehicle as security for a loan. When an individual obtains a car loan, the vehicle is pledged as security until the loan is fully repaid.

How It Works:

Upon taking a loan to buy a car, the lending institution retains an interest in the vehicle, even though the borrower becomes the primary policyholder and owner. The insurance policy designates the borrower as the “hypothecator” and the lender as the “hypothecatee.”

Claims And Loan Repayment:

In the event of a claim, the hypothecate receives the majority of the claim money, safeguarding the lender’s investment. Once the loan is repaid, the car owner becomes the sole owner, necessitating hypothecation removal from the registration certificate and insurance policy.

Certificate Of No Objection (NOC):

To remove hypothecation, the borrower must obtain a No Objection Certificate (NOC) from the lender upon loan repayment. This certificate attests to the clearance of payments and the lender’s approval to terminate the hypothecation agreement.

Including Hypothecation In Car Insurance: A Step-By-Step Guide

Notification At Purchase:

Inform your insurance company about the car loan when purchasing online car insurance. Please provide details of the lending institution to add them as the hypothecate.

Submission Of Documents:

Submit necessary documentation confirming the loan’s existence and details of the lending organization. The insurer verifies these documents before incorporating hypothecation into the policy.

Validation And Acceptance:

Upon successful verification, the insurer explicitly mentions hypothecation details in the policy document.

Adding Hypothecation: Documents Required

Loan Sanction Letter: Formal confirmation from the lender approving the car loan.

Agreement of Hypothecation: A written contract signed by both parties, specifying terms and conditions.

Certificate Of Registration For Vehicle (RC): A copy of the RC containing essential car information.

Proof Of Personal Identity: Valid identification documents for identity verification.

Proof of Address: Documents confirming the current address.

Removing Hypothecation: Offline And Online Methods

Offline Hypothecation Removal:

  • Obtain a No Objection Certificate (NOC) from the lender.
  • Apply at the Regional Transport Office (RTO) with Form 35, NOC, and a copy of the RC.
  • After RTO approval, inform the insurer, providing NOC and the updated RC.
  • The insurer reviews and endorses the policy, removing hypothecation.

Online Hypothecation Removal:

  • Visit the Parivahan Portal on the official Parivahan Sewa website.
  • Under “Online Services,” select vehicle services like termination of hypothecation.
  • Enter vehicle details and upload the required documents.
  • Pay fees online, submit the application, and receive confirmation.
  • Track the application online and accept the updated RC digitally or by mail.

*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.