Must I Cancel My Car Insurance When I Sell My Car?
If you sell your vehicle to another party without purchasing a new one, your state likely requires you to return your plates, meaning you no longer need insurance coverage. If you live in a state that requires a personal liability insurance policy to have a driver's license, you must maintain a personal policy to remain licensed. Call your insurance company as soon as you sell your car for instructions and an explanation about the rules in your state.
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Canceling the Policy
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Continuing to insure a vehicle you no longer own is a waste of money. In some states, you may have to return your plates to officially cancel your insurance coverage. Depending on your state and insurance company's policies, you may be able to simply call to cancel your insurance. Either way, contact your insurance company upon selling your vehicle. Do not cancel the insurance beforehand if the vehicle is still registered without checking your state's policies.
Transferring Insurance
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If you purchase another vehicle to replace your old one, you can transfer your insurance coverage. This way, you remain insured continuously; a lapse in coverage can increase your rate in the future. If you transfer from a liability policy to a full-coverage policy, expect to pay more. State-required minimum liability policies are the cheapest available while a complete, full-coverage option is the most expensive. Talk to your agent about price differences.
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Dealer Policies
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If you purchase another car from a dealership and trade in a car, your salesperson will likely handle your policy change for you. The salesperson will call your agent to provide the new vehicle's information. You should also call your agent to discuss policy changes. Dealers handle your insurance to ensure your lender and motor vehicle department receive the correct information, you should talk about the changes with your agent, as well. You may need different coverage limits or a lower deductible if you are financing the vehicle; both will increase your policy price.
Current Policy Information
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If you did not cancel your insurance policy when you sold your car, you will receive a bill. Do not let your insurance lapse or stop paying your bill; this has negative consequences with most state motor vehicle offices. Return your plates promptly, if required by your state, and provide your insurance company with the proof of your sale or plate return. Your insurance company should backdate the cancellation to the date you returned your plates. You might receive a refund, depending on how far ahead you paid your policy.
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