No Car, No Insurance Needed!
Your insurance carrier will not know if you sold your car under any circumstances until you inform them. It doesn’t matter if you sold the vehicle to a dealership or a private party. State requirements differ greatly state to state regarding the steps required to officially complete a car sale. Some states require a “bill of sale” whereas others require a “notice of transfer and release of liability.” Regardless of state laws, your state’s DMV will not inform your insurance carrier of the transaction. If you sell your car to a dealership, the dealership will assist you in properly completing the needed forms so they can legally proceed with selling the car without complications. If you sell the car through a private party, the responsibility to complete the required forms is on you. It is highly recommended to review your state’s requirements prior to selling your car by visiting your state’s DMV website.
Once you have sold your car, you should immediately contact your insurance carrier to remove the car from the policy. If there are other cars on the policy, it is a simple process. However, if this was the only car on the policy, you would need to cancel your car insurance policy. Contacting your insurance carrier is just as important as completing your state’s requirements. There are two reasons why calling your car insurance carrier should be the first call you make after selling your car.
Get Your Refund
Car insurance policies typically lasts for a six month period. If you paid for the complete six month policy period in full, your insurance carrier will send you a prorated refund check for the remaining days left on the policy period. The average American pays over $100 a month on car insurance and most Americans make monthly payments. So if you sell your car in the middle of your monthly policy period, you should receive a prorated refund check of the monthly cost minus service fees. Your insurance carrier will terminate the policy per your request. However, car insurance policies can not begin nor be terminated on the same day of the request. Therefore, the termination date will start on the following day starting at 12:01 am. If you forget and call a week later, many insurance carriers will not backdate start or termination dates to avoid legal conflicts to when a car is added or removed. Meaning, if you wait, you will lose money!
One Call Can Change Your Life
If the new owner of your old car causes a serious at-fault car accident before you cancel your car insurance policy, it may be possible for the other parties (and their insurance carrier) involved to pursue your car insurance policy and you directly for property damage reimbursement and/or bodily injury-related costs. For example, if the new owner did not purchase car insurance and/or their liability insurance limits were too low to cover all damages caused, you could be held liable for any remaining amount. Your liability insurance coverage would apply in such an event. However, If the damages caused by the new owner exceed the liability insurance limits on your policy, the other parties (and their insurance carrier) could legally pursue you and your assets to be made whole. Meaning, through legal means they could put a lien on your paycheck, home, and/or any other items of value for reimbursement until they are made whole. You could be forced to pay for an accident you had nothing to do with. So, receiving a refund check is great but avoiding a life-changing lawsuit is a better reason.