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  • Writer's picturejoseph retcho

Selling Your Car: What to Know About Insurance

woman holding car keys

Selling a car can seem overwhelming, but there are important things to think about before the sale is done. One thing that people often forget about is car insurance. It's important to keep insurance until the car is officially not yours anymore. After selling, you can cancel your policy, update it for a new car, or switch to a non-owner policy, depending on your situation.


What happens to your insurance policy when you sell your car?

When you sell your car, your insurance doesn't automatically transfer to the new owner. You need to contact your insurance agent to figure out what to do next. If you cancel your policy too soon, you could face fines, a license suspension, or a coverage lapse. A coverage lapse can make your insurance rates go up in the future.


Do you need insurance on a car you’re selling?

Even if you're not driving the car, most states require you to have some level of insurance as long as it's still registered in your name. You could be responsible for any accidents that happen during the sale process, so it's best to keep coverage until everything is finalized.


What do you do with your insurance policy after selling your car?

What you do with your insurance after selling your car depends on if and when you plan to buy a new car:

  • Buying a new car right away: You can add your new car to your existing policy.

  • Buying a new car later: Consider a non-owner car insurance policy if you'll be without a car for a while. Some insurance carriers have option to suspend or freeze your policy for short duration.

  • Not planning to buy a car: You can cancel your policy if you won't be driving.


How do you cancel your auto policy after selling your car?

Make sure the sale is complete before canceling your insurance. Contact your insurance company with a copy of the bill of sale to prove the car is no longer yours. Follow their cancellation process, which may include a fee. You might get a refund for any prepaid premium.


It is strongly advisable to speak to your insurance agent, who can assist you with your situation.


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