When you sell your car it’s easy to forget about everything else that came with it such as tax and insurance. You should think about those things, though. If you’ve bought a new car, then you need insurance for it. If you are no longer on the roads at all, then why pay for insurance for a vehicle you aren’t driving?
Do you know your insurance responsibilities?
If you own a car, you need insurance for it. You are required to keep that insurance until you have transferred the ownership of the vehicle. After that, you are no longer responsible for that car.
You are responsible for canceling your insurance. It is your job to inform the insurance provider of your desire to cancel and to give them a date of sale.
You must get the dates right.
If you cancel your policy too soon, then you could end up in trouble with the DMV.
Can I cancel car insurance if I sell my car?
When you sell a vehicle, as long as the car is no longer registered in your name, you no longer need insurance for it. If the car is registered in your name, then you need to have a minimum amount of insurance, and the amount of coverage required depends on the law in your state. Once you have a bill of sale, you are no longer required to insure the car. So you can cancel your insurance.
Can I cancel within 14 days?
Each company has different policies when it comes to canceling car insurance. Some will allow you to cancel over the telephone, while others might ask that you cancel in writing or require that you confirm it. In general, car insurance policies last for 12 months and then attempt to auto-renew. You can cancel before the 12 month period is up, although there may be a cancelation fee if you try to do so.
Most car insurance providers will process a cancelation request within 14 days.
Do I get money back when I drop my car insurance?
Terms and conditions vary between insurance providers. Let’s have a look at some of the most common car insurance providers and their rules (at the time of writing):
Allstate allows you to cancel by phone, in person, or via mail. The best way is to call.
In most states, Allstate will not charge a cancellation fee; however, there are some states which require them by law. You will get a refund for any unused days, minus the cancellation fee if that applies.
Progressive makes it easy to cancel. In most states, it is possible to drop your policy online via the company portal. You can also cancel in writing, in person, or over the phone. Progressive offers prorated refunds. In some states, there is a cancelation fee of 10% of your remaining premium, but in many parts of the country, there is no cancelation fee at all.
Geico does not offer an online cancelation option, but you may cancel by mail or over the phone. If you wish to cancel over the phone, then you will need to give 30 days notice. Geico does not charge a cancelation fee unless it is mandated by the state, and they will backdate the cancellation if you can prove that you have sold your vehicle and that you have not been using the policy.
Statefarm will allow you to drop your policy via the phone, via mail, or fax. You can modify your policy online, but you cannot cancel it. You can get a refund for any unused time remaining on the policy, and in most cases, they will not charge a cancellation fee; however, some states do require such a fee.
Can I cancel the policy at any time?
You might be tempted to cancel your car insurance the moment you stop driving, even if you haven’t sold the car yet. You might think this is the smart thing to do to save money, but it’s a risky move. If you have a car and it is not insured, the law will treat you as if you are driving uninsured.
You risk your plates being suspended or even suspend your license. You may have to pay a fine to get them reinstated.
There’s another thing that many people fail to consider.
Can you guess what it is?
It’s the test drive.
If you give a prospective buyer the keys to your vehicle, and they crash it, what will happen?
If you are insured, then your liability and physical damage insurance cover will take effect. If you aren’t insured, you are putting your finances at risk when you hand over your keys. The cover is not just for you as a driver. It covers ‘permissive use’ as well. That alone is a great reason to keep your coverage even when you are no longer planning on driving the car yourself.
What to do If you have already canceled your insurance?
If you have already canceled your insurance, but you have not yet sold your car, do not panic. Firstly, park your car in a garage, rather than on the street. This reduces the risk of getting into trouble with the law for having an uninsured vehicle.
If you have a buyer, who wants to test drive your car, get a temporary insurance policy. Some companies offer insurance for periods of between 1 and 28 days. These policies are more expensive, in the long term than a yearly plan but they will do the job while you are waiting to sell the car.
You should get the vehicle covered for your prospective buyers. Do not expect them to pay. If you pay for them, then this takes away one more concern that they might have and makes the sale more appealing to them.
What are the Penalties for Failing to Have Insurance?
Just in case you’re still on the fence about insurance, let’s take a look at some of the most common penalties:
- A suspension of your driver’s license.
- Having the vehicle’s registration suspended.
- Getting a ticket for the insurance violation.
- Increased future insurance premiums
- A hefty fine
Fines can vary.
In Texas, the fine could be between $175 and $350. You will also have a surcharge of $250 added to your next three years of insurance bills. This means that if you get caught without insurance even once that could cost you as much as $1,100.
In Illinois, you would face a fine of up to $1,000 for your first offense, and a $100 reinstatement fee, with your license being revoked for up to three months. In California, a first offense carries a minimum fine of $100, and the fine can increase to up to $450 with additional assessments and penalties. Repeat offenders can see fines of up to $2,500.
In Michigan, the cost of driving without proof of insurance is $200 a year for two years. Driving without a valid insurance policy carries a fine of $500 a year for two years. Yes, you are required to keep proof of your insurance on you at all times. If you’re insured, but don’t have evidence with you then you are in trouble.
Insurance is a serious matter. If you are involved in an accident, or you give the keys to your vehicle to someone, and they are involved in an accident, the consequences can be life-changing. Make sure you are covered at all times until you have completed the sale of your vehicle and have proof that the vehicle is no longer yours. Then, and only then, you should cancel your policy.