As a rule of thumb, it is always a good idea to time the cancelation of your insurance with the date of sale. This ensures that you’re protected for as long as you own the vehicle.
If you’ve bought a new car, you may be covered for a short time on your existing insurance — but ultimately you’ll either need to add the new car to your existing policy or cancel the existing policy and buy a new policy for the new vehicle.
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Read on to find out more about canceling your car insurance after selling your car.
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Can I cancel insurance if I sell my car?
Yes you can, and it's usually pretty easy.
If you’re selling your car and you’d like to
cancel your existing policy, inform your insurance provider and time the cancellation of the policy with the date of sale. This way, you’ll be protected for as long as you own the vehicle.
If you’re selling your old car and buying a new one around the same time, be sure to inform your insurer so you can coordinate any switch in policies. Your old insurance will likely cover your new car for a short period, but this varies by insurer and by state.
Still, it’s best to inform your insurer as quickly as possible as to whether you’ll be canceling your old policy outright, adding your new car to your old policy, or buying a new policy for the new car.
Key Takeaway Inform your insurer if you’re selling your car and let them know if you’ll be canceling your current policy, keeping it and adding a new car to that policy, or buying a new policy for your new car.
How to get a refund
If you cancel the insurance policy for the car you’ve sold, ask your insurance company for a refund for the unused part of your premium.
You’ll have to fill out and sign a form, backdate the policy cancelation to the date of sale, and then send it in to your insurer. Some states mandate that insurers refund unused chunks of a premium upon policy cancelation.
In states where refunds are not mandated, it’s a good idea to ask for one. In all likelihood, your insurer will issue you a refund.
Why? Insurers know that, at some point in the future, you’re likely to be in the market for a car insurance policy—and they want your business. To them, a refund today could mean more business down the road.
Key Takeaway If the state you live in does not mandate refunds for unused portions of a canceled insurance policy, ask your insurer for one anyways, as they’re likely to issue you a refund.
What not to do when canceling insurance
If you’re selling your car, always continue to pay your premiums for as long as you have your policy. Sometimes people make the mistake of stopping payment if they know they’re selling the vehicle on that policy. Big mistake!
If you don’t pay your policy, you’re not insured. If you get into an accident in a car that you’ve stopped insuring because you’re planning on selling it, you won’t be protected from any liability. That could mean devastating financial repercussions if you’re found to be at fault in an accident.
Additionally, not paying your car insurance for any amount of time may negatively affect your credit rating.
Key Takeaway Always maintain car insurance on any car you own until the day you sell it.
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Frequently asked questions
Do I have to cancel my insurance when I sell my car?
Unless you plan on adjusting the existing policy and adding your new vehicle to it, you’ll need to cancel insurance on a vehicle you sell effective the date of sale and buy a new policy for your new car.
Can I cancel my car insurance if I’m not driving it?
Technically you can, but it isn’t smart to do so. Every state (except New Hampshire) requires a car to be insured. By canceling your coverage, you may be invalidating your car’s registration. Once you’re ready to drive again, you’ll have to buy more insurance and may have to re-register your car.
If you cancel your insurance and something random happens—say your car suffers a hit-and-run or a tree falls on your car in the driveway—you’ll have no recourse as you won’t be insured. Any costs would be yours to bear.
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