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Bike Insurance and The Concept of Hypothecation

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Buying a new bike of your choice feels like a wonderful achievement! It means your daily commute can be much quicker and more enjoyable. And to keep your bike secure, you must buy a bike insurance policy or complete your bike insurance renewal if you already have a two-wheeler insurance plan.

However, did you know that when your bike is purchased through a loan provided by a financial institution, the vehicle will still be registered under your name at the local Regional Transport Office (RTO)? Yes, the bike will be yours right from the time of the purchase till you choose to give away or sell your bike. But this is where you need to know about hypothecation.

You may also wonder if financing a bike on loan can influence insurance and other costs or not. The answer is no — how you are financing the bike does not influence the insurance cost. To get a better idea about your insurance premium, it is recommended to use a free two wheeler insurance premium calculator.

Let us know what hypothecation means and how it can affect the insurance for your 2-wheeler.

 What is Bike Insurance Hypothecation?

Hypothecation is when your bike is pledged as collateral when obtaining a loan from a bank or financial institution to finance the bike purchase. When a bike is hypothecated, it means that the ownership of the vehicle is held by the bank or lender until the loan is fully repaid.

The process of hypothecation in your insurance policy is similar to the loan process, as it involves issuing the insurance policy in favour of the bank (the hypothecation holder) from which you have taken the loan. This ensures that in the event of a claim, the insurance payout is directed to the bank to offset any outstanding loan amount.

 Adding Hypothecation to Your Bike Insurance Policy

Whether you are purchasing a new bike or a second-hand one through a bank loan, the insurance company will include the hypothecation details in the policy document. Additionally, if you decide to switch insurance providers during renewals, the new insurer will also inquire about the ownership of the vehicle. Consequently, you may be required to submit a copy of the vehicle’s registration certificate (RC) to the insurance company to provide them with the hypothecation details.

 Documents Required for Vehicle Hypothecation

If you purchase a vehicle through a bank loan, the RTO will add the hypothecation details to the registration certificate. Here is a list of documents needed during the registration process of a hypothecated vehicle. The insurance policy will then reflect the hypothecation details indicating the involvement of the bank which has provided you with the loan:

  • Duly filled Form 34 (hypothecation application form)
  • Your bike’s registration certificate
  • Self-attested copy of your PAN card
  • Insurance policy for your bike
  • Your/bike owner’s address proof
  • Pollution Under Control Certificate (PUCC)
  • Invoice of the payment showing the hypothecation

 Steps to Remove Hypothecation from a Bike Insurance Policy

Once you have repaid the entire bank loan amount, you can proceed to remove the hypothecation mark from your bike insurance policy. The respective bank and the RTO will be involved in this process. Once you receive a No Objection Certificate (NOC) from the bank, you can provide it to your insurance company to initiate the removal of hypothecation from your bike insurance policy:

  • Cancel Vehicle Hypothecation:
    • Ensure that your car loan is fully repaid with no outstanding balance.
    • Obtain a No Objection Certificate (NOC) from the bank once the loan is completely repaid.
  • Collect Documents:
    • Gather the following documents from the bank to be submitted to the RTO:
    • NOC confirming the loan repayment.
    • Form 35 application form.
    • Bike insurance policy document.
  • Submit Application for Hypothecation Removal:
    • Visit the RTO to submit all the documents for hypothecation removal.
    • Complete the RTO fee payment to initiate the removal procedure.
  • Pay Hypothecation Cancellation Fee:
    • Prior to commencing the cancellation process, pay the applicable RTO fee, which may vary by state.
    • Check the fee for your state on the web portal of the transportation department.
    • After submitting all the necessary documents and completing the fee payment, the RTO will cancel the hypothecation for your vehicle.

 Checking the Hypothecation Cancellation Status

The process of cancelling hypothecation may differ from state to state. Therefore, it is recommended to visit the nearby Regional Transport Office (RTO) to inquire about the status of your application. In many cities, the Parivahan web portal allows you to check the cancellation status online.


Bike hypothecation can be a helpful benefit when you are still in the process of repaying your loan to your bank. However, once you complete repaying your loan, it is necessary to cancel the hypothecation. You will, however, have your bike insurance policy to protect you and your two-wheeler from various damages!

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