When you take auto insurance for your car you normally forget to ask an
important question. What if I sell my car? Will I be still liable to it, for the
insurance if something happens to the car when I have signed the titles to
someone else? Can I cancel my auto insurance right after selling my car?
Normally people don’t ask such questions but it would be nice if they do, as you
never know when you might decide to buy a bigger and better car, or will be
handed a project in some other part of the world.
Yes, you can get your auto insurance cancelled right away after you have sold
your car but it would be a nice idea to inform your insurance company
beforehand. As it is the responsibility of the new owner now. If they get into
an accident with the insurance liability still on you, then the deductibles will
have to be paid by you only and your insurance company will incur other costs.
Almost all the state DMV’s have a form that you must submit when you are about
to sell your car to release you from all the liabilities for that vehicle.
Ideally, the new owner must get the car registered as soon as they buy it, but
it is advised that you hold on to your insurance policy for a month or two
longer just in case if they don’t get it registered in their name. This way
you’ll be safe.
Normally the insurance company will charge a cancellation fees from you if it is
cancelled on your request. The cancellation fees can differ depending upon the
insurance company with which you are insured and state laws. Generally, if the
policyholder requests the cancellation of their policy, then they will lose
about 10% of the unused premium. A in depth explanation is that, the earned
premium charged would be more than the pro-rata earned premium. However, the
return premium is approximately 90% of the pro-rata return premium.
The cancellation and the fees associated is normally governed by each state and
their laws, so you should check with your state’s insurance regulator to find
out what cancellation fees your insurance company will be allowed to charge.
This way you can get your auto insurance policy cancelled right after you sell
your car but it will always be good to have you agent or insurance company
informed well before.
