What you need to know
Third-party motor insurance is mandatory by law, and new cars must carry a long-term third-party cover. Banks additionally require comprehensive (own-damage) cover for the loan tenure with the bank named as hypothecatee.
What the bank requires
- Comprehensive policy renewed every year during the loan
- Bank named as hypothecatee / financier on the policy
- Copy of each renewal submitted to the bank
- Total-loss or theft claims paid to the bank first; the balance goes to you
Optional covers
| Cover | What it does | Note |
|---|---|---|
| Credit life / loan protection insurance | Pays off the loan on death (or other covered events) | Optional — Bank of Baroda gives 0.05% lower rate with GCLI |
| Zero depreciation | Full part cost on claims | Useful for new cars |
| Return to invoice | Pays the gap between IDV and invoice on total loss | Helps if the loan exceeds IDV |
| Engine protect, roadside assistance | Specific risks | As needed |
After the loan closes
Once the RTO removes hypothecation, ask your insurer to delete the bank’s name from the policy so future claims are paid directly to you.
Frequently asked questions
Can the bank force me to buy its insurance?
No. You may buy from any insurer as long as the policy meets the bank’s requirements and names the bank.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.