Paul Sanchez
If you've sold your vehicle, you'll need to remove it from your insurance policy. You should cancel your insurance when the legal ownership of the car has been transferred to the buyer. Until then, you are responsible for anything that happens to the car, even during a test drive. If you cancel too soon, you may face legal repercussions such as fines or a license suspension.
| Characteristics | Values |
|---|---|
| When to cancel insurance | After the sale of the vehicle is complete and ownership has been transferred to the buyer |
| How to cancel insurance | Contact your insurance company by phone, email, letter, or in person |
| What to do before cancelling insurance | Ensure you have a final bill of sale and submit a Notice of Release of Liability to your state's DMV |
| Cancelling insurance too soon | You may face legal repercussions such as fines or a suspended license |
| Keeping insurance after selling a car | You can keep your insurance policy, but you'll need to make adjustments, such as switching to a non-owner policy |
| Getting a refund | You may be entitled to a refund for the unused portion of the premium, minus any cancellation fees |
What You'll Learn
Cancelling insurance after selling a car
When you sell your car, it's important to remember to cancel your insurance policy to avoid paying unnecessary monthly costs. However, there are a few things you should keep in mind to ensure you don't face any legal or financial repercussions.
Firstly, make sure that the sale of your vehicle is complete and that ownership has been legally transferred to the buyer. This usually involves signing over the title to the new owner and completing a bill of sale. Keep a copy of the bill of sale, as you will need it when contacting your insurance company to cancel your policy.
Secondly, if your state requires it, submit a Notice of Release of Liability to your state's Department of Motor Vehicles (DMV). This step is important to protect yourself from legal penalties in case the new owner fails to register the car in their name. Check with your local DMV to see if there are any other regulations you need to follow when selling a vehicle.
Once you have completed these steps, you can contact your insurance company to cancel your policy. Most companies allow you to do this online or over the phone, but some may require you to show up in person and sign some papers. Be prepared for the agent to try to change your mind and offer you discounts to keep your business. Ask about their cancellation policy and any cancellation fees that may apply. Follow their instructions carefully, as they usually require a signed form with the cancellation date submitted by mail or fax.
Finally, remember that cancelling your insurance will lead to a lapse in coverage. This can result in higher rates when you purchase a new policy in the future. If you plan to buy a new car soon, it might make more financial sense to keep your existing policy active or switch to a non-owner policy.
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Keeping insurance until the sale is complete
It is important to keep your vehicle insured until the sale is complete. This is because, until the legal ownership of the car is transferred to the buyer, you are responsible for anything that happens to it. This includes when potential buyers take the car for a test drive. If a buyer damages the car during a test drive, your insurance may help pay for damages.
If you cancel your insurance before the sale is complete, you will be held financially responsible for any accidents involving your car. You may also face legal repercussions, such as fines or a license suspension, for owning a registered vehicle without insurance.
To avoid these issues, keep your insurance active until the sale is complete and ownership has been transferred. Only then should you contact your insurance company to cancel your policy.
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Avoiding a lapse in coverage
When you sell your car, you need to take several steps to avoid a lapse in coverage. A lapse in coverage can lead to higher insurance rates in the future, fines, or a suspended license. Here are some essential steps to follow:
Keep Your Insurance Active During the Sales Process
Even if you're not planning to drive the vehicle you're selling, it's important to keep it insured until the sales transaction is complete. Potential buyers will want to test drive the car, and you'll need insurance to cover any accidents or damages that may occur during these test drives. In some states, driving without insurance can result in a misdemeanor conviction, fines, impoundment of your car, towing fees, and storage fees.
Complete the Sales Transaction and Transfer of Ownership
Once you've found a buyer, make sure to obtain a final bill of sale that includes the name of the buyer and owner, the date of the transaction, the make and model of the car, the vehicle identification number (VIN), a description of the car, and the driver's license number of both parties. This document protects you and ensures a smooth transfer of ownership.
File a Notice of Release of Liability
After the sale is complete, visit your local Department of Motor Vehicles (DMV) and file a Notice of Release of Liability form. This step is crucial as it protects you from legal penalties if the new owner fails to register the vehicle in their name. It also helps to check with the DMV to see if your state has any other specific regulations for selling a vehicle.
Contact Your Insurance Company
Once you've completed the necessary steps at the DMV, you can contact your insurance company to cancel your policy. Provide them with a copy of the bill of sale to prove that the car is no longer in your name, and you're not legally required to hold insurance. Remember to ask about any cancellation policies and fees that may apply.
Consider Your Future Insurance Needs
If you plan to buy a new car soon, it may be more financially sensible to keep your existing policy active. You can benefit from loyalty discounts and avoid higher rates due to a lapse in coverage. Alternatively, you can switch to a non-owner policy if you won't be driving for a while.
By following these steps, you can effectively remove a sold vehicle from your insurance policy while avoiding a lapse in coverage and ensuring a smooth transition to your next vehicle.
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Cancelling insurance before or after selling
When selling a car, you might want to cancel your insurance right away to avoid paying the monthly cost. However, if you plan to buy a new car within the next few weeks or months, it makes more financial sense to keep your policy active. If you no longer need to rely on a motor vehicle for transportation—if you're moving to an urban area, for example—you can cancel your car insurance policy as soon as your vehicle sale goes through.
Even though you might not plan to drive the vehicle you're selling, you should keep it insured until you complete the sales transaction. People who come to see the car will want to take it for a test drive, and you'll need to be insured when driving the car to potential buyers. Driving without insurance could result in a ticket, the penalties for which vary by state. For example, California drivers operating their vehicle without insurance could receive a misdemeanour conviction that carries fines, impoundment of your car, towing fees, and storage fees.
To complete the process of selling your car, you need to have a final bill of sale. This legal contract must include:
- The name of the buyer
- The name of the owner
- The date of the transaction
- The make and model of the car
- The vehicle identification number (VIN)
- A description of the car
- The driver's license number of both parties
- Any conditions of the sale, such as repairs to be made, as-is conditions, or warranty
- The price of the car and payment method
Even once you finish the transaction, sign the receipt, and sell your car to its new owner, you shouldn't cancel coverage yet. You must visit the DMV in your state and file a Notice of Release of Liability form. Doing so protects you from legal penalties in case the new owner fails to register your car in their name. You should also check with the DMV to see if your state has any other regulations to follow when selling a vehicle.
After this step, you can effectively cancel your auto insurance. Most insurance companies do not charge a cancellation fee, though a few charge $50 or $100. AutoInsurance.org recommends calling your insurance company and letting the agent know you plan to cancel. You should also plan to follow up with an email or a letter. If you prefer, you can visit the local office of the insurance company to cancel your policy in person. This is also a smart step if you want to learn more about ways you can save on your coverage.
Prepare for the agent to try to keep your business and change your mind about switching. If the company offers discounts, you might consider keeping your coverage. Ask for details about the cancellation policy. Ideally, you should cancel the policy on the same day your new auto coverage becomes active.
Your insurance company might require you to submit an official signed form with the cancellation date by mail or fax. Follow the instructions from your agent carefully. The insurance company does not automatically receive a notification when a car changes owners. You might also be eligible for a partial refund if you already paid for the policy period.
Ask about processing time when you cancel your policy. The insurance company might require up to five business days before the change takes effect. Do not stop making insurance payments without canceling your policy. You could end up with a ding in your credit rating, as well as difficulty getting a new insurance policy later after this type of lapse. If you do not have proof of a new insurance policy or proof that you have sold your car, such as a bill of sale or relinquished plates, the insurer will consider your cancellation a lapse in coverage. This can make it more difficult to get auto insurance at an affordable rate if you do purchase a new vehicle later.
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Transferring insurance to a new vehicle
When you buy a new vehicle, you can transfer your existing insurance policy to it. Most insurance companies allow you to do this, and it is usually a straightforward process. However, you may need to adjust the premium amount and terms of the insurance. Your benefits would typically remain intact.
To transfer your insurance to a new vehicle, you can contact your insurance provider, and they will process the change for you. You may need to complete the documentation within a limited time of buying the new car, such as 10 to 15 days. You can do this by giving your insurer a call or changing the details online. You will need to provide the vehicle identification number and the date you want the new policy to begin.
If your new car is worth more than your old one, your premium will likely increase. On the other hand, if your new car has more safety features, your premium could be lower. It is a good idea to call your insurer before making any decisions about your new car so that they can give you an estimate of how much your premium will change.
If you are happy with the cost and customer service of your current insurance provider, transferring your insurance to your new vehicle can save you time compared to shopping for a new insurance policy.
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Frequently asked questions
You should cancel your insurance as soon as the vehicle is sold and the ownership is transferred to the buyer. This is because the insurance ties to the car itself, not the owner, so the buyer can drive under your insurance unless they get their own.
Before you cancel your insurance, you need to have signed over the title to the new owner, completed the bill of sale, and submitted a Notice of Release of Liability to your state's DMV, if required. You should also have a copy of the bill of sale ready when contacting your insurance company.
Cancelling your insurance too early could result in legal repercussions and fines. You will also be held financially responsible for anything that happens to the car until the sale is complete and ownership is transferred.
If you forget to cancel your insurance, you will continue to pay the insurance premium, which will cost you money. It will also put you at risk of ruining your insurance score and you will have to pay for deductibles and excess costs if the new owner gets into an accident.
