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Hypothecation in Car Insurance: What is it and How You Can Remove it?

Purchasing a car is an expensive investment, and you might have to rely on car loans to help you achieve this milestone. When you do so, although the car is registered in your name, the lender becomes a hypothetical owner of the car. This ownership of your car by the lender is called hypothecation and is acknowledged on your car registration certificate (RC) and car insurance. However, once the loan has been paid off, you need to remove hypothecation in car insurance and other car documents.

How to check and remove the hypothecation status?

The process to check and remove vehicle hypothecation may differ from one state to another. Generally speaking, the registration certificate will show hypothecation towards the loan provider. You can rely on online apps and portals to check the hypothecation status of your vehicle.

When it comes to the removal of the hypothecation status of your vehicle, you must visit the RTO or Regional Transport Office. You must follow the steps given below:

  • You have to begin by paying off your car loan.

  • Next, the lender or loan provider will issue a No Objection Certificate (NOC) to you.

  • You must submit the NOC to the relevant RTO along with the original registration certificate and other required documents.

  • Once the RTO completes their process, you will be granted a new registration certificate.

The documents required for removal of hypothecation are as follows:

  • Car registration smart card or registration certificate issued by the same RTO, which mentions the hypothecation details.

  • NOC issued by the lender.

  • Duly filled Form 35, which is essentially an application to the RTO for hypothecation removal.

  • Loan closure letter and/or loan statement from the lender.

  • Pollution Under Control (PUC) certificate that is currently active and valid, preferably issued in the same state.

  • Identity and address proof of the person who is named as the owner of the car.

  • Valid insurance policy.

How to remove hypothecation from car insurance policy?

The process of checking the hypothecation on your car insurance policy is simpler. You can simply call up the insurance provider’s customer service and give them the details of your policy. They will inform you about the hypothecation status.

Cancellation of hypothecation from car insurance is equally easy. You can simply submit the NOC from the lender, and the provider will remove the hypothecation marking and give you an updated policy document.

It is important that you remove hypothecation from your car’s papers as it helps provide clarity as to who the owner of the vehicle and car insurance is. It is also vital to have a clear title for when you plan to sell your car. Plus, in the event that you end up with a car being a total loss, any claim reimbursing that will go directly to the lender. Thus, if you remove hypothecation, you can avoid such hassles while filing a claim. Lastly, removal of car insurance hypothecation is essential while opting for a policy renewal or shifting to a new provider.

Now that you know more about car hypothecation make sure that your car documents are in your name and your ownership is clear.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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