When To Cancel Insurance After Selling A Car

If you’re considering selling your car, you may be wondering what to do about your insurance as well. The process of cancelling your car insurance policy doesn’t have to be difficult, but timing it right is important in order to avoid facing financial hiccups or paying higher future rates on policies.

If you cancel insurance too soon and create a lapse in coverage, you may be subject to fines and penalties, up to and including suspension of your driver’s license. Conversely, if you cancel insurance after selling the car too late, you could wind up paying added and unnecessary expenses and risk additional legal liability.

Knowing the right time to cancel your car insurance is critical, especially if you’re looking to prioritize saving money. Let’s take a closer look at anyone looking at selling a vehicle needs to be aware of.

Do You Need Insurance To Sell A Car?

In a word: Yes, in most circumstances. Dealerships often need proof of insurance in order to successfully transfer the title of a car to a new owner during a sale. On the flip side, depending on which state the car is sold in, insurance may or not be required during a private sale.

For the most part, states generally require car owners to hold an auto insurance policy that meets local legal requirements. Also keep in mind that it makes sense to maintain your insurance while conducting a sale, as you could still be held legally responsible for any accidents involving the vehicle during the sales process. Doubly so as fines and other legal penalties may be imposed if you’re currently uninsured.

When To Cancel Car Insurance After Selling

For anyone looking to stay compliant with the law and save money on car insurance, it’s important to know when to cancel insurance after selling the car.

The vehicle needs to be registered in its new owner’s name prior to your effective date of insurance cancellation. Not having car insurance actively present on a vehicle that’s registered in your own name can potentially subject you to fines and penalties such as towing and storage fees, vehicle impoundment, or even license suspension.

You should only cancel after you’ve sold the vehicle, completed a bill of sale, and legally signed over the title and possession of the car to the new owner. Keep in mind that you may also be required by some states to submit a Notice of Release of Liability to your local department of motor vehicles as well.

Can I Keep My Insurance If I Sell My Car?

As you think about different types of car insurance and whether or not to keep them after selling a car, it helps to know a few things.

For starters – yes, you can keep your insurance if needed. However, you’ll need to make a few changes to your existing policy.

To begin with, if purchasing a new vehicle, you can add it to your current policy if desired. Doing so will typically require you to provide your insurance carrier with information such as the car’s make and model, VIN, and information on any lienholders. Keep in mind that your insurance rates may be subject to change based on the new vehicle’s specifications as well.

Alternately, if you sold your car and don’t immediately purchase another one, you might consider investing in a non-owner insurance policy on a temporary basis as well. Such a policy covers you if you happen to borrow a car or are driving a rental vehicle. If interested, you can contact your insurance carrier for more information.

What To Do Before Canceling Your Policy

Several steps need to take place before you cancel your insurance on a car prior to selling the vehicle.

Call Your Insurance Agency

Be sure to give your insurance agency a call to get the latest information on your policy and understand the best way to cancel insurance coverage. Your insurer can also help answer any policy-specific questions that you may have about canceling the policy and selling the car. Keep in mind that each insurance carrier operates according to different rules and procedures, making it important to get any information from and pose any questions that you may have directly to them.

Gather Legal Documents For The Sale

Collecting and gathering all documents that you need in order to sell a car prior to the time of sale can save you time and hassle. It can also help protect you against liability as well.

Let’s take a closer look at documents that the DMV requires for successful cancellation of your insurance policy and owner registration:

• Title transfer: Upon selling a vehicle, you must transfer over the title, which names the new owner as the legal owner of the car. As the car’s seller, you’ll sign a title transfer as part of the process which effectively gives the new owner the right to have a new title processed and issued in their name.
• Bill of sale: A bill of sale specifies the details of your transaction with the new buyer.
  On it, you’ll find important details such as the buyer and seller’s information, vehicle ID information, the purchase price of the car and how payments were processed.
• Odometer disclosure: Legally specifies the current mileage of the car at the time of sale. Putting the information down in writing is important, as you won’t be held liable for an accident that happens after the final odometer reading. As a seller in the document, you’ll also promise that you have not illegally rolled back the odometer as well.
• Notice of Release of Liability: Certain states require this to be filed when a vehicle is sold. It notifies the DMV that as a former owner, you’re no longer responsible for traffic violations, parking citations, or any criminal actions associated with the car following its sale. To obtain a Notice of Release of Liability, you’ll need visit your local DMV office.

Alert The DMV To Your Vehicle’s Sale

If you reside in certain states, visit your local DMV to cancel your vehicle’s registration after selling the car. As part of the process, you may be required to turn in and hand over your old license plates, as well as provide a VIN for identification and verification of your vehicle. A service record and inspection report for the auto may also need to be furnished as well, and in select jurisdictions, you’ll also need to sign off on a Notice of Release of Liability.

You should not cancel your insurance policy and coverage on your vehicle until you’ve canceled your registration with your local DMV. As you plan for how to budget your money surrounding the sale, don’t forget that cancelling at the DMV can sometimes come with added costs and fees as well.

Be sure to check with your neighborhood DMV to get information on local cancellation procedures and rules as the process can vary significantly from state to state. Note that certain DMV agencies may allow you to complete the process online or via postal mail.

How To Cancel Your Auto Insurance

You can cancel your insurance policy after you’ve sold your car. However, prior to doing so, be certain that you’ve transferred the title to the automobile’s new owner – and have completed the bill of sale and Notice of Release of Liability Form.

That said, cancelling your car insurance policy is fairly simple and straightforward, though specific processes and procedures will vary by carrier. And that some states may have laws in place concerning whether you can cancel your car insurance prior to turning in your existing license places. Noting this, you’ll want to connect with your DMV and insurance company to make sure that you’re in compliance with local rules and regulations.

In any event, the following general guidelines outline how to cancel your car insurance:

1. Prior to cancellation, purchase a new policy, which will help you avoid any potential lapses in coverage.
2. Contact your current insurer via phone, mobile app, website, or mail to file a cancellation request as available based on your insurance provider’s policies.
3. Request to speak with a customer service representative or agent about cancellation to clarify any questions that you may have about cancelling your auto insurance coverage.
4. Sign a cancellation letter if it is required by your carrier that includes your personal information and details on when you want the cancellation processed. As part of the letter, request any refunds that may be owed to you.
5. Ask your insurance provider to send you a notice in writing confirming that they have cancelled your auto policy.

The Bottom Line

For those considering when to cancel insurance after selling the car, the best time to do so is as soon as you’re legally able. That means making sure that official documents are filed with the state and local DMV authorities prior to doing so, and that ownership and title of the vehicle has first been transferred over to a new buyer.

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