Claiming Insurance Refund After Scrapping Your Vehicle: A Complete Guide

When your vehicle is scrapped, most people only think about RC cancellation and road tax refund. However, your motor insurance policy is equally important. If your policy is still active, you are entitled to a refund of the unused premium or can transfer the balance to a new vehicle’s policy.

This ensures that you don’t lose money on a policy for a vehicle that no longer exists.

Why Insurance Refund After Scrapping Matters?

1. Financial Benefit

• Get back the unused portion of your insurance premium.
• The refund is usually calculated on a pro-rata basis (remaining months of coverage).

1. Policy Transfer Option

• Many insurers allow you to transfer the remaining premium balance.
• Saves money when insuring your new vehicle.

1. Regulatory Compliance

• Ensures no insurance policy is linked to a deregistered or scrapped vehicle.
• Prevents misuse or fraudulent claims.

1. Peace of Mind

• Simplifies paperwork and closes financial obligations on your old vehicle.

Steps to Claim Insurance Refund After Vehicle Scrapping

1. Obtain Vehicle Scrapping Certificate

• Issued by an Authorized Vehicle Scrapping Facility (AVSF).
• Proof that your vehicle is scrapped and deregistered.

2. Submit RC Cancellation & RTO Documents

• File for RC cancellation at the Regional Transport Office (RTO).
• Collect the acknowledgement or cancellation slip.

3. Contact Your Insurance Company

• Raise a refund/transfer request.
• Submit scrapping certificate, RC cancellation copy, and identity proof.

4. Verification by Insurer

• Insurance company cross-verifies with RTO records.
• Ensures no pending claims exist on the policy.

5. Receive Refund or Transfer

• Refund is calculated on pro-rata basis.
• Option to transfer policy balance to your new vehicle.

Documents Required

Original Insurance Policy

Vehicle Scrapping Certificate

RC Cancellation Copy (or RTO acknowledgement)

KYC Documents (ID & Address Proof)

Application for Refund/Transfer

Bank Details (for refund credit)

Pro Tips

• 🕑 Apply immediately after scrapping for faster refunds.
• 📑 Always keep multiple copies of scrapping and RTO documents.
• 🚗 Buying a new vehicle? Ask for premium transfer instead of refund.
• 💻 Many insurers now offer online refund/transfer requests, saving time.
• 📞 Stay in touch with your insurer’s customer care/agent to track refund status.

Frequently Asked Questions (FAQs)

Q1. Can I claim a refund if I had only third-party insurance?

👉 No, refunds are generally available only for comprehensive policies with unused premium. Third-party policies usually have no refund option.

Q2. How long does it take to get the insurance refund?

👉 Typically, 15–30 working days, depending on insurer and document verification.

Q3. Can I transfer my No Claim Bonus (NCB) after scrapping?

👉 Yes ✅, NCB is transferable and can be applied to your new vehicle’s policy, offering premium discounts.

Q4. Is it mandatory to cancel insurance after scrapping?

👉 Yes. Keeping an active policy linked to a scrapped vehicle can lead to legal issues or fraudulent misuse.

Q5. Will the refund be full or partial?

👉 Refund is always pro-rata, based on the unused tenure of the policy.