All about hypothecation in car insurance


04 Aug 2023

Read All about hypothecation in car insurance. For more information, check out the car insurance policy from Kotak General Insurance.

If you are purchasing a car via a bank loan, then it is necessary for you to learn about hypothecation. You can find more details about it on this page.

What is hypothecation in car insurance?

When you buy a car via a bank loan, it gets registered in your name at the local RTO and the same shows on the vehicle’s registration certificate (RC). However, the RTO will acknowledge your car’s hypothecation in the RC, affirming it is in favour of the lender or the bank. This means until the loan amount is paid in full, the bank will retain the ownership of the vehicle. Similarly, this hypothecation is also acknowledged in your car insurance policy.

How to add hypothecation to my car insurance policy?

When you buy car insurance online or offline, your insurer will ask whether the vehicle was purchased with or without a loan. They will also ask you to provide the vehicle’s RC to check the car’s hypothecation status. The same process is repeated at the time of car insurance online or offline renewal, even with a different insurer.

What documents are needed for vehicle hypothecation?

Here are some documents that you will need to submit during the registration of a hypothecated vehicle at the RTO:

• Form 34 duly signed by the financial institution.

• Dully signed copy of the vehicle owner’s PAN card.

• Valid car insurance papers.

• Original vehicle RC.

• Owner’s address proof.

• Receipt of paid fee during endorsement of hypothecation by the RTO.

• PUCC (Pollution under control certificate).

How to remove hypothecation from my car insurance policy and RTO?

To remove hypothecation from your car insurance policy, you will first need to settle the loan in full. You can either repay the bank within the loan tenure or pre-close it with early payments. Once the loan gets settled, the lender bank will issue a No Objection Certificate (NOC).

You can then submit this NOC, along with Form 35, car insurance certificate, PUCC and other supporting documents, to the local RTO and pay the necessary fee to initiate the removal of hypothecation from your car. Upon removal, the RTO will issue a new vehicle registration certificate (RC) in your name and remove the hypothecation status from it.

In terms of removing hypothecation from your car insurance policy, just contact your insurer, request the removal process, and submit the necessary documents along with the NOC provided by the bank. Upon completion, your insurer will issue a new and updated car insurance policy document.

Why is it essential to remove hypothecation?

There are many reasons to remove hypothecation from your car upon full loan repayment. For example;

• You will be able to officially retain sole ownership of the vehicle and avoid any ownership issues.

• You will be able to avoid any complications regarding ownership transfer when selling the car.

• You will have to worry about less paperwork during insurance renewal or a new purchase from a different vendor.


Obtaining the NOC from the bank doesn’t automatically mean that you have officially retained the vehicle ownership on the car documents. Thus, it is vital to terminate hypothecation from your car insurance policy and registration certificate.

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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.