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If you sell your car, what happens to insurance?

Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella...

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Reviewed byDaniel Walker
Licensed Auto Insurance Agenthttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/insproviders-live/ca745a12-daniel-walker.png

UPDATED: Mar 19, 2020

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The lowdown...
  • Insurance coverage follows the car, not the driver
  • When you sell your car, make sure you notify your insurance company once the deal is complete
  • Likewise, buyers should also contact their insurer to let them know of the change
  • Shop and compare whether you are buying or selling a car to get the best deal on car insurance

Are you thinking about selling your car anytime shortly? If so, you may want to consider the fact that your insurance follows your car. This means that, if you sell your vehicle but fail to notify your insurance company that you sold it, your insurance will remain in force.

You will be paying the insurance of the person you sell your car to until you cancel it.

Enter your zip code above to compare car insurance quotes and find the best deal for your situation.

If You are the Seller

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Most people who purchase a car from someone else understand that you will cancel your car insurance when you transfer the car title to them after the sale.

You need to make sure that you remember to call your car insurance company to let them know that you are selling the car.

You should keep your current car insurance in force until you stop driving the car and put it up for sale or until such time that you have successfully transferred the title to the buyer.

When you sell a car to someone, you must transfer the title from your name to the person who is purchasing it. To do this, visit your state DMV or call them to see what the steps are for transferring the title to another driver.

Instructions for the Buyer

As a buyer of a used car, you must submit a title transfer application then check on your state requirements for car title transfer and follow them exactly.

Some states require you to provide an odometer reading as well as your VIN (vehicle identification number) and a bill of sale. The bill of sale provides legal proof that you purchased the car.

Once you have submitted this information, you will be able to have the title transferred to your name. The DMV in each state has different regulations and the Department of Transportation in your state may also be involved in the successful transfer of your title.

What to Do after You Cancel Your Insurance

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You should be careful to keep your old car insurance in force of your old vehicle until you have transferred your title to the new owner. At that time, you need to contact your car insurance company and have them cancel the old policy.

Remember that you will still be covered on the old insurance policy until the end of the month in which you cancel your premium or until the end of your monthly term.

Insurance companies are required to continue to cover you for any premiums you have already paid for. You may pay for a few remaining days of insurance while your policy is being canceled.

Good communication between you and your car insurance company is important so that you can inform the new car owner about where the coverage stands when you sell the car.

It is always best to remind them to purchase their insurance even if your insurance is still in force for a few more days to avoid you having to risk having your old policy pay for a collision or other driving or traffic violation that the new owner might be involved with after the sale.

Once you have verified that the sale is complete and all paperwork has been transferred successfully, it is safe to cancel your insurance on the old vehicle. This should be done as soon as possible after the transfer is complete.

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If You are the Buyer

If you are the buyer of the new vehicle, you will want to start shopping for new car insurance for the car you are buying as soon as possible.

Don’t wait until the sale is complete to shop for car insurance. It is the wise car buyer who shops around before finalizing the sale so that you can see where the best deals are.

If you currently have existing car insurance on a previous vehicle, you can just call your insurance company and see what type of deal they can give you for dropping your old car and putting the new one on your policy.

If you are keeping both cars, then you will just be adding a car to your current policy.

You should see what types of discounts they can offer for the new vehicle and compare that to what you may be able to get with other insurers.

Tips for Shopping for New Car Insurance

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When shopping for new car insurance, you will want to keep the following things in mind to find the best deal.

  • Mandatory coverages – First and foremost, you should make sure that you get the mandatory coverage amounts required by your state of residence. This includes the minimum bodily injury and property damage liability amounts as well as any other requirements of your state. Some states also require uninsured and underinsured motorist coverage.
  • Optional coverages – In most cases extra coverages such as uninsured and underinsured motorist coverage is optional but it is a good coverage to add since it will allow your insurance company to pay for damages or injuries to you even if the accident is someone else’s fault.
  • Additional amounts – You may want to add to the amount of liability or collision coverage you are carrying so you will make sure that you have plenty of coverage no matter what the situation. This coverage may give you extra security and peace of mind when you increase the amount to fit your individual risk level or need.
  • Start time for premium – When you are buying a new car, you will need to make sure that you are aware of when your new insurance will begin.
  • Cost – Cost of the premium is also important, and you should compare several policies and companies to see how you can get the best deal. But remember that the best deal may not always be the cheapest insurance. Find the policy that fits your risk level and your concerns best and the one that will give you the best value for your cost.

When to Contact Your Insurance Company

There is some debate on how much or when you should contact your insurance company because some people have seen an increase in premiums only because they called their insurer and asked how much the company would cover in a wreck.

This situation is rare, but sometimes the questions you ask may send a red flag to your insurance company by giving the impression that you have had an accident.

If you do call your insurance company, make sure you specify that you have not had an accident (unless you have) and that you need to know what will be covered.

The best way to avoid having to have this conversation is by keeping good records on your policy.

Most companies have an online site that allows you to look into your account and policy at any time. Use this to see what you have in your policy and add to your policy if you see the need.

Report Changes in Your Vehicle Ownership Immediately

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When you buy or sell a car, you are required to report this information to your insurance company immediately. When you do this promptly, you will know that you have the right car on your policy.

Remember that if you fail to report the correct vehicle information, it is likely that you will not be covered in an accident that occurs in another vehicle.

This information is imperative to remember when buying or changing cars so that you will know you are always covered.

Finding the Best Coverage

The best thing you can do when you sell or buy a car is to look at your current insurance plan, make the changes that are necessary, and shop and compare deals between insurance companies.

Look at the following information to help you decide which company to use:

  • cost
  • terms and conditions
  • any discounts you qualify for

Enter your zip code below to find the best deal on car insurance for your situation.

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