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UPDATED: Mar 13, 2020
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Selling a car on the private market is one of those tasks that you don’t look forward to taking on unless you’re a car salesman at heart. When it comes to a for-sale-by-owner transaction, there can be a lot of hurdles that you’ll have to cross if you’re not fully prepared. From advertising the vehicle for cheap to having all of the right documentation available, selling a car involves more than just the haggling.
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Cars that have already been posted for sale often sit in ride sharing lots or driveways with the hopes that the right buyers will see the signs sitting in the window. When you park the car so that it acts as its own billboard, you would think that you don’t need insurance on it.
Unfortunately, that assumption could cost you a huge sum of money. Here’s what you need to know about selling an uninsured car:
Is car insurance required in your state?
It doesn’t matter if a car is being driven daily or if it has been sitting and collecting dust for years, you have to comply with state-mandated insurance laws no matter what. It’s the state government and not the Federal government that’s in charge of setting the rules as they pertain to insuring vehicles registered and titled in the state.
Every state has a different liability insurance requirement. While many of the compulsory requirements are similar in most states, there are a few states that operate under an entirely different system where only no-fault coverage is required. If you’re selling a car that’s already registered, it’s your responsibility as the owner and seller to check the minimum insurance laws and comply with them.
Is the car currently registered?
If you have an extra vehicle that’s been sitting for a while, the vehicle may not even have an active registration. Whether or not the vehicle is actively registered will dictate if you can legally cancel your car insurance.
When you pay your registration renewals religiously each year, you’re basically saying that you accept that you’ll have to comply with compulsory insurance laws.
An active registration equals a need for an active insurance policy. If you’ve suspended your registration or you haven’t renewed it, that’s a different story. Since the registration isn’t active, you legally don’t have to insure the car. You also can’t legally drive the vehicle on any public roads or the car will be towed and then impounded.
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Letting Your Registration Expire Can Cause Complications
If you want to cancel your insurance without repercussions, you need to make sure that you turn your plates in and officially suspend your plates. Simply choosing not to pay your next registration bill because you don’t want to pay insurance premiums isn’t going to solve the problem. In fact, choosing to let your tags expire creates more problems.
You’re billed for your tags every year. After the first year, you’re sent a renewal bill. As long as you’re being sent renewal invoices it means that you’re the person who’s liable for paying titling fees and other things. If you don’t pay, the registration expires. That means you’ll be fined for each 30-day period that you’re late.
The fees will accumulate over time as the car sits with expired tags. It will catch up with you, even if you aren’t planning on owning the car for much longer.
If you have hundreds of dollars in late fees built up, you may not have to pay for it but the buyer will. If you don’t disclose the fact that there will be fees that have to be paid to transfer ownership, you could be dealing with a major headache after the sales transaction.
What happens if you have an active registration and no insurance?
If you’ve continued to pay your registration so that you don’t have issues transferring ownership, you’ve taken care of business on one end of the scale. You still need to be sure that you take care of business when it comes to your insurance. Canceling your insurance or letting the policy cancel for non-payment can also cause major trouble on your end.
The state can see whether or not you have insurance on your car because of new electronic reporting technologies. Since insurers verify insurance coverage in real time, you can get in major trouble for having a lapse for even just a 24-hour period. Some of the consequences that you could face for having a lapsed policy include:
- A suspended registration for failing to maintain insurance
- Impoundment of your vehicle for failing to maintain insurance
- Assessment of a reinstatement fee and a fine if you’re cited by an officer
- Requirement to maintain high-risk insurance and an SR-22 for driving without insurance
Can someone test drive your vehicle?
Car buyers can’t really assess the condition of a car unless they get inside and take it for a spin. Dealerships that are in the business of selling cars have special commercial liability insurance in place that protect the company when their letting customers test drive cars off of the lot. You, as a private seller, don’t have that commercial insurance.
You may not have commercial insurance but your personal liability insurance will kick in to help pay for claims if something happens while a buyer is test-driving your car.
Your insurer may first try to collect from the driver’s insurance if they had coverage in place. If you have no insurance, you have no protection. You’ll also still be on the line for damages because you own the car.
You can sell a car without insurance but you’ll have to sell it as-is. Unless you own private property where the car can be safely tested, you can’t let the buyer get behind the wheel.
If you want more opportunities to sell, shop for coverage and buy a short-term policy. To do this, use an online rate comparison tool and you’ll be able to find the best deal.
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