Saturday, January 19, 2008

Can I claim car insurance procured by previous owner?

A client posed a query to me regarding his claim for insurance.
The client bought a second hand car.
This car, had been insured by the previous owner.
After the car was sold to the client, as a second hand car, the car was involved in a collision.
The client now asks whether he can claim the insurance that was procured by the previous owner.

The answer is No.
Client cannot claim the insurance proceeds out of the insurance procured by the previous owner.
There is a rule in our insurance law that an interest in the property insured must exist when the insurance takes place, and when the loss occurs.
It is true that the client has interest over the second hand car at the time of the loss (collision).
Unfortunately the client did not have interest over the car when the insurance took place.
When the insurance policy for the car was procured, the one who had interest was the previous owner, not the client.
Thus, the client cannot claim the insurance proceeds.
If he makes a claim to the insurance company, the claim will be denied.


Anonymous said...

I am an IBP member now based in the US. In my humble opinion, and correct me if I'm wrong, the new owner may yet claim benefits under the insurance of the former owner. This is only possible if the former owner had endorsed his unexpired interest in the insurance in favor of the new owner.

Jay Dejaresco said...

You are correct Sir. If there is an endorsement, and the insurance company doesn't object, the insurance company waives the protections of the insurance law. In reality, the insurance company usually won't object to endorsements, if the one year period of coverage has not lapsed. It's a good business decision because the insurance company is after the renewal of the policy for the next year, by the new vehicle owner.

Brittania said...

Well said.