If I sell my car, is my insurance still valid?
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UPDATED: Jul 14, 2021
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- 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 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 policy active and the coverage will automatically protect you for up to 14 days when you buy the new car
When you’re selling your car, you have a lot of things to worry about. After you decide on a sales price, the next step will be to create an extremely detailed listing where you disclose all of the vehicle’s issues.
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 appoints 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 in your car for a few weeks while the buyer shops around. Before you consider doing this, here’s what you need to know about insurance after a vehicle is sold:
Never 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 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.
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You Need to Cancel Your Auto Insurance When You No Longer Own Your 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.
If you stop making payments without requesting a cancellation, you could affect your insurance payment history.
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 claims presented by a buyer who has recently purchased the car from you.
In fact, most insurance companies will deny the claim if you’re upfront and honest because you’re no longer eligible for coverage on the car.
Why aren’t sellers eligible for coverage on vehicles they are selling?
You were once eligible for coverage on the car but the change is 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.
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.
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.
If you cancel your policy before you buy another car, you can shop around for competitively priced insurance online by using a special tool. Plug in your zip code and personal information and you’ll find the lowest prices for new insurance on your new vehicle.