I have a doubt; for a car bought on loan, in case of an accident – who gets the claim money: the owner or the lender?
Indranil Sengupta, Kolkata
Your doubt is valid and it is good for you to understand your position if you have a car on loan and it needs an insurance claim. While you may be the car’s registered owner, but till you pay off the loan, it’s the financier who is for all practical purposes considered the owner. For vehicles bought on loan, motor policies have a clause—the ‘agreed bank clause’—which says that money payable under the policy (except that on repairs) goes to the lender. That includes claim proceeds. But what the financier can keep for himself is restricted to his financial commitment to the car; he gets the claim amount only as a ‘trustee’. This means that if there’s a leftover balance, it has to be given to you. Financiers usually do so by adjusting it against any outstanding owed to you.