All about hypothecation in bike insurance

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03 Aug 2023

Hypothecation in bike insurance one of the bike insurance-related terminologies

In India, it is mandatory to have a bike insurance policy in place to ride your two-wheeler legally. Also, taking comprehensive bike insurance online or offline can cover several other benefits, such as personal accident cover, third-party liability cover, etc.

There are many bike insurance-related terminologies and aspects that are still a mystery to many people. One of the important aspects of bike insurance is Hypothecation, which we will understand in this blog post.

What is hypothecation?

Hypothecation is an agreement between the bike owner and the bank or financier for the purpose of securing a loan against the bike. The bike is hypothecated in favour of the bank or financier until the loan is repaid. This means that the bank or financier holds the right over the bike and can take possession of it in case of default in loan repayment. It is important to note that the bike owner continues to be the legal owner of the bike even after Hypothecation if the loan premiums are being paid on time.

What is the need for hypothecation in bike insurance?

Hypothecation is an important feature of bike insurance that can protect both bike owners and lenders. It helps the lender to ensure that the bike owner makes timely repayment of the loan. On the other hand, it helps the bike owner to get a loan for purchasing the bike. It is important to note that Hypothecation can be done only on new bikes, and the insurance company must be informed about it at the time of taking the bike insurance policy.

How to add hypothecation to a bike insurance policy?

Adding Hypothecation while buying bike insurance online is a simple process. All you need to do is to submit the relevant documents, such as a loan agreement, registration certificate, etc., to the bike insurance company. The insurance company will then update the insurance policy with the hypothecation details.

How to get hypothecation cancelled in bike insurance?

Once the loan is paid off, the bike owner needs to get the hypothecation cancelled from the RTO. To do so, the bike owner needs to submit the following documents to the RTO:

• A written application for hypothecation cancellation

• A copy of the loan agreement

• A copy of the No Objection Certificate (NOC) from the lender

• A copy of the bike insurance policy

Once the documents are submitted, the RTO will cancel the Hypothecation and issue a new registration certificate to the bike owner.

What are the benefits of hypothecation?

Hypothecation provides certain benefits to the lender, the bike owner, and the insurance company.

Benefits to the lender

• The lender has the legal right to take possession of the vehicle in case of loan default.

• The lender can sell the hypothecated vehicle to recover the loan amount.

Benefits to the bike owner

• The bike owner can get a loan to purchase a two-wheeler.

• The bike owner can get a competitive interest rate on a loan.

• The bike owner can enjoy the convenience of lower EMIs.

Benefits to the insurance company

• The insurance company can collect the premium for the policy without any problems.

• The insurance company can pay the claim amount directly to the lender without any permission from the owner or buyer.

It is important to remember that bike insurance policies with Hypothecation are slightly more expensive than regular policies. So, If you are planning to get a bike loan, make sure to know about two wheeler loan application requirements and look for the best and reasonably priced bike insurance policy to ensure maximum protection.

Visit Kotak General Insurance for More Information.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.