Hypothecation in Two Wheeler Insurance

4w_m_landing_page.svg
carBuy Insurance For New Bike  Click Here

Hypothecation in Two Wheeler Insurance

In an era where buying something on loan and financing has become so easy, almost every other person uses this option to keep his finances balanced even after making an expensive purchase.

One of the most common items that are bought with the help of financing companies or a loan are cars and bikes. When talking about loans, the term “bank hypothecation” always comes first.

But do you know what it means and how it can affect your two-wheeler insurance? Let us shed some light on this topic.

Hypothecation Meaning in Two-Wheeler Insurance?

Hypothecation in two-wheeler insurance means that the two-wheeler you have purchased either on loan or through financing is owned by the financier until you repay the debt.

Let us understand this with an example:

Suppose you have taken a loan from a bank to purchase a two-wheeler. Once the vehicle is purchased, you go to the regional transport office (RTO) to register it.

While the RTO official will register your bike by your name, it will still make a separate note on the registration certificate that the vehicle in question has been bought through the concerned bank. This fact is also mentioned in the two-wheeler insurance policy you own.

This note by the RTO and your insurer will hypothecate your two-wheeler in favour of the bank. This means that your bike will remain the bank's property until you have completely settled your loan. In short, your bike will become collateral for the loan taken.

Advantages of Bike Loan Hypothecation to Different Parties

Advantages to the Financier:

  • Helps financiers mitigate the risk of non-payment of loans.

  • Helps financiers recover the debt in case of loan default.

  • Gives them the surety that the loan amount is not in danger.

  • Allows them to put pressure on the borrower if he does not abide by the contract rules after taking the loan.

Advantages to the Bike Owner:

  • Helps him save the hassle of arranging finances by himself.

  • Allows him to retain and use the two-wheeler.

  • Allows him to get a loan at lower interest rates as the lender has the security of using the vehicle as the collateral.

Advantages to the insurance company:

  • Allows the insurer to charge a slightly higher premium rate than regular bike policies.

How to Add Hypothecation in a Bike Insurance Policy?

Adding hypothecation to your two-wheeler insurance policy is necessary; otherwise, you can face problems in future. To add hypothecation to the bike insurance, you need to follow the below-written process:

  • First, get the hypothecation added to your vehicle registration certificate (RC).

  • Once the addition is made, go to your chosen insurer and answer all the questions asked by him. These questions will include information about the source of financing, the name of the financier, the loan amount, etc.

  • Considering the details given by you, the insurer will add hypothecation to the bike insurance policy.

Note: The questions mentioned above and other details about hypothecation remain mentioned in the RC already so do not forget to carry the registration certificate when visiting the insurance company.

Documents Required to Add Hypothecation in Two-Wheeler Insurance

  • Registration Certificate (RC)

  • Your Address Proof

  • PUC Certificate of the Bike

  • Self Attested Copy of Your PAN Card

  • Duly Filled Form 34 (for making an entry of an agreement of hire-purchase/lease/hypothecation subsequent to registration).

  • Two-Wheeler Insurance Policy

  • Invoice of Payment for Endorsement of Hypothecation by RTO

How to Terminate Hypothecation in Two-Wheeler Insurance?

Terminating hypothecation is extremely essential for the bike owner as this transfers the ownership of the two-wheeler to him.

Removal of hypothecation from the bike insurance policy is done once the bike owner repays the loan entirely and receives the NOC (No Objection Certificate) from the lender.

However, to cancel a hypothecation from an insurance policy, you need to first get it removed from your bike RC.

The Process of Hypothecation Termination from Registration Certificate

  • Take the NOC and other loan and bike-related documents to the RTO.

  • Submit these documents and pay the applicable fee to start the cancellation process.

  • Once the RTO verifies the documents, it cancels the hypothecation and issues a new bike registration certificate.

The Process of Hypothecation Termination from a Bike Insurance Policy

  • Take the new RC, two-wheeler insurance policy and other bike-related documents to your insurance company.

  • Submit the required documents to the insurer.

  • Once he verifies the documents, the hypothecation cancellation process will start and the hypothecation note will be removed from your two-wheeler policy.

Documents Required to Terminate Hypothecation

  • Registration Certificate

  • Allotment Letter of the Bike

  • NOC from Financier

  • Address Proof

  • PUC Certificate

  • Duly Filled Form 35 (for deletion of hypothecation)

  • Copy of Loan Agreement

  • Valid Bike Insurance Policy

  • Copy of PAN Card

Importance of Hypothecation Termination

Ease in Transfer of Ownership

Hypothecation cancellation makes you the sole owner of the bike so in case you want to sell it to another person, you will not have to take anyone’s consent. This ensures an easy transfer of ownership to the buyer.

Complete Freedom

Hypothecation binds you to the financier’s approval. In some cases, you may not be allowed to make modifications to the bike. Thanks to hypothecation cancellation, you become eligible to take bike-related decisions on your own without waiting for anyone’s approval.

Insurance Claim

As you are the owner of the two-wheeler, only you or the beneficiary added by you in the policy will be entitled to the insurance claim amount compensated by the insurer.

Lower Premium Rates

Hypothecation removal changes the title of your bike from collateral security of the bank to your asset. As the bike only belongs to you (the policyholder), insurance companies lower the premium to be paid on renewal of the bike insurance.

Why Buy Two-Wheeler Insurance from Tata AIG?

To add or remove hypothecation, you need to have a valid bike insurance policy. Not having an insurance policy means no hypothecation addition and cancellation. This is where Tata AIG comes into the picture.

Tata AIG offers bike insurance plans that protect you from financial losses resulting from accidents and several other covered reasons. Besides, it also allows you to go for hypothecation termination without any trouble.

With a high claim settlement ratio and several beneficial optional add-on covers, Tata AIG makes it easier for every bike owner to have bike insurance. With us, you can choose between third-party bike insurance, own damage bike insurance and comprehensive bike insurance, per your insurance needs and budget.

Whether you want to buy or renew bike insurance, explore our website and select the policy best suited to your needs.

Wrapping it Up

Paying off the loan is not the only thing you need to do to transfer ownership of your bike to yourself; there are many other responsibilities that you have to fulfil to own your two-wheeler completely.

Thus, visiting the RTO for hypothecation cancellation is a crucial task to ensure that you have a valid registration certificate and two-wheeler insurance policy.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

Related Articles

How to check hypothecation cancellation status?

How to check hypothecation cancellation status?

iconDown

To check the status of your hypothecation cancellation, you can either visit the concerned RTO with the required documents or use the Parivahan Sewa portal.

Can we sell the bike without cancelling the hypothecation?

iconDown

No. You cannot sell your bike without hypothecation cancellation. This is because until the loan amount is repaid and the cancellation process is completed, the financier is considered to be the owner of the bike.

How long does it take to remove a hypothecation?

iconDown

The hypothecation removal process gets completed in a few weeks. All you need to do is get the NOC (No Objection Certificate) from the lender on repayment of the loan and visit the nearest RTO to apply for hypothecation termination.

What is the fee for the addition of hypothecation?

iconDown

According to Section 81 of the Central Motor Vehicles Rules, 1989, the fee for addition of hypothecation is ₹100.

What is the fee for cancellation of hypothecation?

iconDown

According to Section 81 of the Central Motor Vehicles Rules, 1989, the fee for cancellation of hypothecation is ₹100.

scrollToTop