Can I transfer car insurance to another person?
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UPDATED: Oct 18, 2021
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- Buying or selling vehicles requires transferring insurance from the buyer to the seller
- Auto policies cannot be transferred between two people
- Adding or removing vehicles requires some basic information
Car insurance is necessary for every vehicle and driver on the road. You have to carry the state minimums to drive legally. Many people carry higher liability limits and collision and comprehensive coverages to protect their cars. Your insurance coverage should be as unique as you are. So transferring coverage on vehicles is an important process to understand.
There are some general insurance principles that the NAIC outlines that are necessary to review to fully understand how it works.
What should you know about auto insurance?
Insurance is compulsory for all vehicles on the road. Purchasing a vehicle from a friend or dealer requires you to prove your financial responsibility, which is good for you since you won’t have to worry about crippling debt should you be involved in a small accident. Some states allow individuals to prove financial responsibility by depositing the state minimum coverage limit with the state in cash or through a bond. These limits are meant to be minimal, though. If you’re involved in a larger accident your limits don’t cover in full, you could still be held financially responsible for the remainder.
It’s not an option to bypass purchasing or transferring coverage.
How do insurance companies determine the cost? Insurance companies base the premium charge on the following:
- your personal information
- your driving history
- your chosen coverage
Age, prior accidents, the year model of your vehicle, and the deductible are all factors that determine your insurance premium. A good insurance agent can also look for discounts like good student discounts, seasoned driver discounts, and more. Adding a driver to your policy, reducing your deductible, or getting into an accident can all increase your rates. Virtually anything that shows greater responsibility including buying a car with more safety features could save you money. It’s just a matter of finding the right insurance providers.
Finally, the insurance policy is a contract between you and the insurance company. The insurer agrees to provide coverage for your vehicle in exchange for a premium and a promise that all the information you have provided to them is true and accurate. If you forget about a ticket or a small accident, auto insurance companies do run MVR and CLUE reports to confirm what’s on your record. The rate they offered initially can change if you left something out. If it’s something that’s discovered later, especially if you intentionally hid it, it could lead to a cancelled policy and even criminal charges in extreme cases. So it’s important
It is for this reason that you cannot simply transfer a policy from your name to someone else’s. In fact, most, if not all, auto policies contain language stating that the policy cannot be transferred to anyone without the insurer’s permission. Insurance companies are calculating the risk and giving you a price based on your driving profile. They cannot offer the same price to someone who may not be as experienced and safe a driver as you.
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What should you know about buying or selling a car?
There are two parties involved in the transaction, the buyer and the seller, who each have different responsibilities in the sale. How does insurance work in a sales transaction?
The seller should already have the vehicle listed on their insurance policy. For dealerships, this is with their business insurer, and for friends or individual owners, with their personal auto insurer. As long as the title is in the seller’s name, it would stay that way. Once the sales agreement is signed and the buyer takes possession of the car, the seller could take the car off their insurance while the buyer would need to add the car to their insurance policy.
- The seller should have all documents prepared to complete the transfer of ownership
- The buyer should have the necessary documents ready to send if required
Keep in mind, insurance coverage is not transferred with the car. The two drivers have different risk profiles, and the seller would no longer have an ownership interest in the vehicle. You cannot insure and collect on your neighbor’s car. Similarly, you cannot insure and collect on a car you sold to someone else.
What if a buyer wants insurance comparable to the current policy?
What if the new owner doesn’t think they have the best deal on their premium and wants to compare? What if the auto insurance company doesn’t want to insure the new owner, who has several drunk driving violations on his record?
Once the sale is complete, the seller merely has to contact his agent or insurer and request that the vehicle is removed from his policy. The buyer can get a quote from the same company or a range of different auto insurance companies. But insurers would need to set premiums based on the risk profile of the driver to be insured and the car they would be driving at that point based on their vehicle identification number (VIN).
Some companies may require the bill of sale, so make sure to have that available if needed. If this is the only auto listed, your policy may cancel and you will receive a refund for any premium you are owed.
For buyers, the easiest and safest way to get insurance for your new vehicle is to contact your insurer or agent before you finalize the sale. That way, if they require any special information you are prepared and can complete the transfer process stress-free.
- Make sure you have all necessary documents, including the VIN, bill of sale, and title
- Decide what coverage you want on your new vehicle — liability, physical damage, rental, etc.
If you don’t have an auto policy, research and compare the best options for your needs. There are many insurance companies fighting to provide you with a quote, so make sure that you get the best bang for your buck.
If this is your second vehicle or you are upgrading to a new auto, congratulations! Adding this new vehicle to your policy is easier than researching and purchasing one in the first place.
Contact your agent or call your insurance company directly. Let them know that you just purchased a vehicle and want to add it to your policy.
They will ask for the required information (the date that you purchased the vehicle, the VIN, what coverage you would like, etc.) and let you know what documents, if any, that you will need to send them to add this to your policy.
If you’re replacing one of the vehicles, let your agent or the representative know and they will make the switch.
While you’re taking care of this, it’s a good idea to confirm the coverage that you have. Make sure you are okay with the deductibles and see if there is anything you would like to add — or maybe no longer even need — now that you have a new vehicle.
This is another reason that insurance cannot be transferred between owners. You must choose the coverage that you would like, from liability limits, to damage deductibles, to rental coverage, about which the prior owner may have different ideas.
Things to Remember
When you buy or sell a vehicle, you have to deal with insurance companies, so make sure to have all the information necessary to streamline the process. Auto insurance policies cannot be transferred to new owners for multiple reasons:
- The insurance policy is a contract between you and the insurance company and is specifically priced and offered to you based on your information.
- You deserve the opportunity to compare and choose the insurance company and coverage that best fits your needs, rather than take a company, or a price, that you might not like.
Insurance decisions are personal and differ by person, so make sure that you are making the most informed decision for yourself. While policies cannot transfer between two different people, vehicles can easily be added and removed from policies.
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