Nominating a vehicle for Preferred Beneficiary is critical

Are you and your cousin both eyeing your grandfather’s classic car? Up the ante the smart way by getting your grandfather to nominate him for you, his favorite grandchild!

On a more mundane level, we can now name our vehicles our preferred beneficiary and have them reflected on the vehicle’s Certificate of Registration (RC) itself, just like a financial investment.

Launched in May 2021, this new facility makes the transfer of a motor vehicle easy and smooth in the event of the owner’s death.

Former formalities such as obtaining a legal certificate of inheritance from the relevant government agency and clearances from other legal heirs can be a thing of the past after the nomination.

Nomination can be made when you purchase a vehicle and register it, or at any time thereafter. And of course you can change the nomination at any time.

Additionally, you can do this online at vahan.parivahan.gov.in authenticated by an OTP to the mobile phone number registered to your vehicle’s RC. With either method, proof of identity of the nominee should be provided at the time of nomination, which will assist in future verification. Neither the nomination nor any changes to the nomination require the consent of the nominee.

With this signed and sealed procedure, your candidate can transfer the vehicle into their name and also receive the insurance policy which they can then renew. We see many people driving around in family vehicles for years, still on behalf of a deceased person, unaware of the laws they are breaking and the financial risks they are taking. When it comes down to it, they won’t be able to just sell it either.

If a person has an accident while still driving the car in their deceased father’s name, the insurance company can deny liability simply because the owner is deceased, the insurance is still in his name, and the current user is not entitled to that Vehicle or an insurable interest in the vehicle to maintain an insurance policy.

If the accident damages the vehicle, it’s an easier problem. Pay and have it repaired.

Liability to Third Parties

However, liability to individuals for property damage, personal injury or death can be very serious. Because without insurance to protect us from these liabilities, the labor and cost of legal representation and the financial burden of compensation become personal legal responsibility. If your papers were in order, your insurance would have stepped in and covered you, and you could have gone on with your life as usual.

Here is an uncomfortable reminder: TP liability awards awarded by courts in the event of death amount to lakhs and millions of rupees and there is no easy way for a person to endure or wriggle out of it.

Aside from nominating the owner, we need to ensure that the vehicle insurance itself is properly nominated. This will take effect if a claim is pending at the time of the owner’s death, or in the case of indemnity for the death of the owner himself. Nomination may be made at policy inception as part of the application form or later by confirmation from the insurer.

Coming back to the use of vehicles without transfer of ownership, there will also be a number of issues with the Regional Transport Office (RTO). Road haulage regulations require that information about the death of a vehicle owner be communicated to them within 30 days and that the transfer of ownership be initiated within three months, whether by nomination or statutory certificate of inheritance.

For three months after notification of the RTO, the nominee/legal heir has the right to use the vehicle as if he were the owner, by which time the transfer must be secured.

A side note of caution: if you are also selling a vehicle please ensure the buyer transfers title and insurance into their name or you will still be referred to as the actual owner of the vehicle and held legally responsible for any hit or miss at the vehicle.

There are precautions you can take to ensure the buyer doesn’t miss the transfer, and we’ve seen this in previous installments of Cover Note.

As a senior insurance colleague of mine points out, “Vehicle owners generally do not understand the severity of motor vehicle traffic without mandatory TP insurance. I have seen situations where the legalities lead people to take risks, even when gravity is understood. It’s absolutely insane in my opinion.” I can’t agree more.

(The author is a business journalist specializing in insurance and corporate history)