When To Cancel Car Insurance After Selling A Car

So you’ve decided to sell your car and need to know how to cancel car insurance properly. Maybe it’s time to upgrade. And with the vast technology and innovations in engineering offered in new cars, it’s an exciting time to try out a new vehicle. Or perhaps you are simply selling your car because you need the extra money. Regardless, you will want to know when to contact your insurance company and cancel your policy. 

when to cancel car insurance after selling a car

Let’s take a look at all the steps involved in canceling car insurance and the right time to do it. 

Why Do I Need To Cancel Car Insurance? - Find the best car deals!

Car insurance is a way to protect yourself, passengers, and other drivers in traffic from financial loss caused by property damage or medical treatment. It is also a requirement in most states to be on the road legally.

When selling the car, the ownership is transferred to the buyer, including the responsibilities of registration and insurance. The insurance is tied to the vehicle and only necessary while you’re the owner. Canceling insurance is an often overlooked step, as sellers assume it happens automatically with the transfer of ownership. 

The general rule is that car insurance ties to the car itself, not the owner or driver. The policy covers a person driving the vehicle under your permission. Sale of vehicle implies consent, meaning that the buyer can freely drive under your insurance without the need to file for their own.

Continuing to pay the insurance premium not only means you’re wasting money, but it also puts you at risk of ruining your insurance score. If the new owner gets involved in a car crash, the incident will be logged into your record, and you will have to pay for deductibles and excess costs not covered by the policy.

When Do I Cancel Car Insurance? - Find the best car deals!

You should cancel your car insurance as soon as the vehicle is sold for the reasons previously stated. Make arrangements with the buyer on the best way for them to transport the car home. You can have the car towed, offer to deliver it yourself, or if you’re confident in their driving skills, allow them to drive it home. 

The first step in canceling car insurance is to call your company or agent. The current situation has made it much easier to handle business remotely, but some companies will still require you to show up in person and sign the papers. Ensure that all legal bindings have been resolved in writing, as an incomplete process may cause serious problems with future claims.

It is not uncommon for insurers to charge a flat fee or a percentage of the remaining premium as compensation for the early termination of the contract. It is possible to negotiate your way out of paying expenses by agreeing to continue your business with the same company once you buy a new car. 

Transfer The Insurance Policy

When trading in or selling a car to buy another in a short period, coverage does not have to be canceled. Instead, the policy transferred after adjusting for the value of the new vehicle. An administration fee might apply, but transferring is generally considered cheaper than cancellation. 

The potential buyer might be interested in taking over your policy rather than filling for a new one. Ensure they know that the same rate might not apply, as their driving record and claim history is taken into account. Benefit rates are applied with each claim-free year, with some companies offering 50% off after five years. You will be entitled to the same benefits when insuring your next car.

Retroactive Cancellation

The seller might forget to cancel the insurance for many reasons and only find out they haven’t done so after the extension contract arrives at their address. Explain your situation to the insurer and have them cancel the policy immediately. 

A refund on the unused months is possible depending on the wording of the contract. Negotiate with them and imply you will take your business elsewhere. Even if the insurer has no obligation to issue a refund, keeping you as a client is their priority. 

One thing to be aware of is the legality of double insurance. If the new owner is unaware of your continued policy, they might get a new one from a different company. Typically, companies share information to ensure no vehicle is insured twice; however, it can still happen. Two insurance policies can be considered an attempt to profit from the insurance, which is legally a fraud, so cancel yours as soon as possible.

Summary - Find the best car deals!

Canceling insurance is a necessary step in every car sale. Thankfully, the process is quick and relatively inexpensive. However, failure to do so can result in serious repercussions, so contact the insurance company as soon as you’ve finalized the sale.