Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Mar 13, 2019

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Important facts to know...

  • You have the right to cancel your insurance on your car as long as you’re authorized as a policyholder
  • If you cancel your auto insurance early and still own your car, make sure that you have other coverage in place
  • When you’re selling a vehicle as a private seller, keep insurance on the car until you’ve signed a release of liability
  • If you’re going to trade your car in, you can easily transfer the insurance from your old car to the new car
  • When you sell your only vehicle, you could be left paying a short-rate fee for terminating your contract early

Selling your car doesn’t have to be difficult. With all of the platforms that you can put your sales listings on, it’s very much possible to create a classified ad, post it, and start negotiations all within a few hours.

Some sellers who list their vehicles for sale below the Kelley Blue Book value find themselves flooded with calls shortly after their ads go live.

Since the Internet and platforms like Craigslist and Facebook have made vehicle sales easier than ever, it’s important that you’re prepared before you start the process.

Compare car insurance rates by entering your zip code into our free quote tool above!

You don’t have to put off selling your car just because your current insurance has a few months left on it. If you’re trying to time everything right, here’s what you need to know about canceling your insurance:

Your Rights as a Consumer

You and every other consumer buying auto insurance have rights. If you’re not convinced, you can search for a Consumer Bill of Rights on your state’s Department of Insurance website to see what’s detailed in the bill.

Most of the rights are similar from state to state, but there are always minor details that are changed.

One right that doesn’t change no matter where you live is your right to cancel your insurance at any time.

It doesn’t matter if you’ve just started your term or if the policy period is about to end, you’re given the power to buy insurance and to terminate the contract as well. The only requirement is that you’re an owner on the policy itself.

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Why do you need to be a policy owner?

There are two types of individuals that can be listed on a policy. There are drivers and there are also policyholders.

  • A driver is someone who can affect the premiums of the policy. They have permission to drive any vehicle on the policy but they aren’t necessarily considered the owner of the vehicle.
  • Policyholders aren’t just drivers, they are the individuals who sign up for insurance. They own the vehicle or have an insurable interest in it.

Since they are the ones who have entered into the contract with the insurance company, they have the authority to make changes to the policy. They also have the power to terminate the contract by submitting a request in writing.

What happens to your policy if you sell your only vehicle?

If you’re tired of all of the expenses that come with owning a car, the solution would be to sell the vehicle and live like many other car-less Americans. It’s always been possible to survive without a car, but it’s easier than ever because of all of the car-sharing services that exist.

When you sell the only vehicle that you own, you’ll have to submit a written request to cancel the policy.

In the request, you have to include this information:

  • policy number
  • your name
  • when you want the policy to be canceled

Since you’ve sold the vehicle, you’ll put the date of sale as the effective date of the termination.

You can terminate your policy as of the date that you sold the vehicle but if you have any intentions of buying a car in the near future, you’ll be better off keeping your policy in force until you get a new vehicle.

This is only advised if you’ll be buying a car within the next few weeks.

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What happens to the premiums that haven’t been used?

If you’ve already paid up the premiums on your insurance term, you’re entitled to at least a partial refund of the money that you’ve paid. In most cases, the carrier will short-rate your premium refund instead of pro-rating it.

If it is pro-rated, you will get all of the unearned premiums back in the form of a check.

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What is a short-rate refund?

A short-rate refund is a refund that has been reduced because of a short-rate fee charged by the carrier. In some states, insurance companies have the right to charge their clients a small fee for ending their contract early.

This fee might be a percentage of the total premiums owed or a fixed amount between $25 and $50.

If you find out that your insurance is going to charge you a fee to end your policy, it’s worth a try to ask for the agent to waive it.

If you’re selling your only car because you’re surrendering your license or you’re moving away from the country, there’s a chance that the carrier could waive the fee for you.

Don’t Cancel Your Insurance Until You’ve Released Liability

According to the information on file with the DMV, you’re still technically the registered owner of the vehicle until the buyer goes to the local branch and applies for a transfer of title. Since you don’t have control over the owner it’s in your interest to fill out a release of liability form.

When you submit the release of liability form, you’re saying that you’ve sold the vehicle and no longer have an interest in it. You are also asked for the buyer’s name and the date that you sold the vehicle.

This form ensures you’re not held liable for carrying insurance on a car that you don’t own.

What do you do if you’re trading your vehicle in?

If you trade a car in for a new one, you don’t have to cancel your insurance and buy a new policy. Instead, you can just change out the vehicle from the old one to the new one and keep all of your existing credits and discounts.

At the end of the day, you can cancel your insurance in the middle of the term for any reason. Before you rush to terminate anything, make sure that you take the right steps.

If you’re going to buy a new car, get quotes for a new policy online right here and see where you can find the lowest rates.