Understanding Hypothecation in Bike Insurance

Posted on: Sep 11, 2023 | | Written by:

Understanding Hypothecation in Bike Insurance

Published on September 07, 2023. EST READ TIME: 3 minutes

The easy availability of loans and financing options has made it easier for almost everyone to own bikes. It has made it simpler for individuals to realise their aspirations of buying a dream bike. By taking a simple loan or with the help of financing companies, you can own a bike by paying EMIs. Irrespective of which lender or institution you reach out to for your loan, hypothecation is a common element that you will come across. Here is all that you need to know about hypothecation in bike insurance.

What does hypothecation bike insurance mean?

When you buy a bike with or without financing, it will be registered in your name at the nearest Regional Transport Office. Though the registration certificate has your name, the RTO will make a note of the financial institution that has issued you the loan. And it will hypothecate the bike in the favour of the financial institution. In other simple words, the financial institution owns the bike till you repay the loan amount. And once the loan is complete, the hypothecation is removed, so that you can claim the bike as your own.

Hypothecation can seem a bit confusing at the beginning to understand. Yet a simple way to understand it is that when you buy the bike on loan, the financial institution will mark the bike as collateral or security. Should you fail to complete the payment for the bike, the institution can repossess the bike and auction or sell it. This helps the financial institution to cope with defaulters. Though the registration certificate will have your name as the owner, it will be marked as hypothecated.

Steps to add hypothecation to bike insurance policy

It is essential that your bike insurance policy reflects the hypothecation details. The details should be present on the document, irrespective of whether you are buying a brand-new bike or a pre-owned bike. And the same details will come in handy during your policy renewals as well. To update hypothecation in bike insurance, you can provide a copy of your registration certificate to the insurer.

Documents needed for vehicle hypothecation

Hypothecation in bike insurance can take place if the RTO has updated all the hypothecation-related information on your registration certificate. And only if you take the help of a financing company for the purchase of a bike. Here is a list of all the documents that you must submit to the RTO for the hypothecation of your bike.

1. Registration certificate for the bike

2. Proof of address of the applicant

3. Filled out hypothecation application form or Form 34

4. Bike insurance policy

5. A copy of the PAN card that is self-attested

6. Pollution Under Control Certificate

7. An invoice of payment supporting the hypothecation

Steps to remove hypothecation details from bike insurance policy

As important as it is to include hypothecation in bike insurance, you must also remove the details once the loan is repaid. The financing company and RTO will also be involved in the process of removing the hypothecation of the bike. On completion of the repayment of the loan, you will receive an NOC or no objection certificate from the financial institution. Once you receive that, you can inform your insurance provider to remove the hypothecation details. Here are the steps involved in the process.

1. Cancellation of hypothecation

Hypothecation in bike insurance can only be cancelled once the loan has been repaid in its entirety. After you complete repaying the loan, the bank statements should not show any more pending dues. You can either pay all the EMIs on time to complete the repayment or pre-pay the loan amount if you have some additional cash. When complete, the financial institution will issue an NOC, saying that the loan has been repaid.

2. Documentation

On the completion of the loan, you will need to submit some documents to the RTO. This will enable them to remove the hypothecation details from your bike's registration certificate. Here is a list of those documents.

◦ NOC or no objection certificate from the lending institution confirming the loan is repaid completely.

◦ Bike insurance policy.

◦ Form 35 duly filled out.

3. Submission of documents

You must visit the RTO where your bike is registered to remove the hypothecation details. Ensure that you carry the above list of documents to the RTO. Once you submit the above documents, you will need to make a payment to complete the process.

4. Payment

There is a nominal fee that you must pay to the RTO for the removal of hypothecation. The exact fee might differ depending on the state and RTO.

How can you check the hypothecation cancellation status?

Hypothecation in bike insurance can only be removed if the RTO approves your request first. If you want to know the cancellation status, there are a couple of ways to do the same. Firstly, you can visit the RTO and inquire about the status of the cancellation. Secondly, you can sit back at home and check the status online via the Parivahan portal.

Why it is essential to ensure your bike?

A bike must be insured, whether you use financing options or not. There are a few reasons for this. The following are the most prominent ones.

1. The Motor Vehicle Act of 1988 requires all bike owners to insure their bikes. Should you fail to do so, you will end up paying a hefty penalty while riding the bike, since it is not legal to do so.

2. Comprehensive bike insurance makes sure that your bike has protection against accidental damage.

3. If your bike is stolen, a comprehensive plan ensures that you will receive the IDV or insured declared value in bike insurance as compensation.

4. During natural calamities, if your bike incurs any damage, the policy will cover the expenses of the repairs.

5. Personal accident cover in the insurance makes sure that any injuries leading to disability, or the death of the insured are also covered.

Conclusion

Buying a bike with the help of financing is quite common these days. And when you do, it is hypothecated. The details are with the RTO and it is essential that you update hypothecation in bike insurance as well. The information must be updated while getting the hypothecation, as well as removing it.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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