A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years Leslie Kasperowicz

UPDATED: May 9, 2022

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Important Facts to Know

  • If you sell your vehicle, it’s your duty to cancel your auto insurance as soon as the ownership shifts to someone else
  • Your car insurance when selling a car won’t protect the new owner after a bill of sale is signed
  • If you don’t cancel your coverage on a vehicle that you have already sold, the insurance company will deny any claims that are made because the new owner should have their own insurance that pays for the loss
  • When you sell your only vehicle, you can request that your policy is suspended so that you can maintain your loyalty discount and insurance history
  • If you’re going to buy a replacement car within a few days, keep your car insurance after selling the car active
  • The coverage will automatically protect you for up to 14 days when you buy the new car

You’ll also have to take a whole gallery of pictures and decide where you should post the listing for the greatest exposure.

The process doesn’t end when you publish your listing. After you start to get calls from serious buyers, you have to make appointments for buyers to see the car in person. Once you have an offer, you’ll have to start the negotiations.

You might even be asked to keep your insurance when selling a car in your vehicle for a few weeks while the buyer shops around. Before you consider doing this, the following is what you need to know about insurance after a vehicle is sold.

Why shouldn’t you cancel your insurance before your car is sold?

If you have no intentions of driving your car to work, school or the store, you might think that canceling your insurance makes sense. It might be an expense you don’t want to pay, but it’s a necessary one when you have a car that’s registered to be driven on public highways.

You’re legally required to have mandatory insurance limits when you have a car with a valid registration.

If, however, your car is in storage and you’ve surrendered the plates, you have the legal right to cancel your insurance.

Selling an unregistered car can pose problems with buyers. Keep your insurance and registration and you’ll be able to sell your car quicker because the buyer can test drive it. If you’ve dropped the car from your insurance plan, a test drive could result in a series of consequences, since the person driving the car wouldn’t be able to provide a cop with proof of insurance.

If you stop paying for insurance on a car you’re selling, you could pay some serious consequences. One of the biggest consequences is that you’ll be fined by the DMV for letting your insurance lapse once your company notifies the agency.

You could also have your registration suspended, which could cause problems for the buyer and affect your reputation with other potential customers interested in what you’re selling on market websites.

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Do you need to cancel your auto insurance when you no longer own the car?

There are certain requirements regarding car insurance after selling a car. When you sell a car, the DMV doesn’t automatically notify your insurer that you’re no longer the vehicle owner. Instead, it’s your duty to contact your own insurance company to cancel the coverage that you’re paying for, and update your auto policy.

If you stop making payments without requesting a cancellation, you could affect your insurance payment history. Instead, contact customer service, or if you work with a specific insurance agent reach out to them, and inform them of what is going on with the vehicle.

Sometimes, buyers will have unique requests. Some of the requests are easy to comply with and others are close to impossible.

If the buyer has asked that you keep your insurance valid on the car for one, two, three or even four weeks, you need to know that this isn’t a request that you can satisfy.

If you continue to pay your insurance, you can keep it active. That doesn’t mean that your insurance will cover auto insurance claims presented by a buyer who has recently purchased the car from you.

In fact, most insurance companies will deny the insurance claim after selling a car if you’re upfront and honest because you’re no longer eligible for coverage on the car. You wouldn’t want to be stuck paying for additional coverage on a vehicle no longer in your possession.

I Sold My Car but Forgot to Cancel Insurance

The seller might forget to cancel the insurance policy for many reasons. However, they will eventually find out they haven’t canceled their insurance when the extension or renewal contract arrives at their address. You should explain your situation to the insurance company and have them cancel the policy immediately.

Depending on the contract, you might be able to get a refund on the unused months. Even if the insurance company has no obligation to give you a refund, they might decide to do so in order to keep you as a client. Still, you should be aware of the legality of double insurance. If the new owner doesn’t know about your continued policy, they might get a new one from a different insurer.

Companies do share information to ensure no vehicle is insured twice, however, it can still happen. Having two insurance policies can be considered an attempt to commit insurance fraud, so you should cancel your coverage as soon as possible.

Why aren’t sellers eligible for coverage on vehicles they are selling?

You were once eligible for coverage on the car but the change in ownership is what violates your auto insurance contract. Your insurance policy says that you have to have an insurable interest in your car when you’re insuring it. This is going to be one of the reasons why you won’t be able to chance what types of coverage you have on a vehicle you’re selling.

You have to be the owner or a co-owner to keep your coverage. As soon as you transfer ownership, claims presented will be denied by the insurer. This is why the buyer has to purchase and maintain their own insurance. These additional requirements are to protect you – insurance providers want to make sure they’re holding the right person accountable.

It’s your job as a seller to protect yourself when you’re privately selling your car. As soon as you sell your car you should fill out documents and release your liability through the proper channels. Otherwise, you may find that you’re paying for an auto insurance policy attached to a car you don’t even own anymore.

If you cancel your policy before you buy another car, you can shop around for competitively priced insurance online by using a special tool. You may even find a cheaper rate for your new car.