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Selling your car on your own has its advantages. Not only can you avoid the low-ball trade offers that dealers quote you, you can also sell the car on your own schedule. While it can pay off to be a private party seller, creating ads and meeting with clients can be time-consuming.
If you’re selling a car for the first time, make sure to protect yourself. Just because you’re no longer commuting in the vehicle doesn’t mean that you don’t need to carry insurance on it.
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Even parked cars that you own must be covered if they are registered and you plan on letting buyers test drive them. If you’d like to know what happens to your insurance while you’re selling your car and after it’s sold, read on:
Don’t Cancel Your Insurance Before It’s Time
Auto insurance is required by state law. In virtually every state, you must have coverage that will pay for damages that you cause while you or your family members are driving the licensed vehicle.
When you have more cars than drivers in your home, the vehicle that you plan on selling might stay parked in the driveway.
If your car is staying parked, don’t jump at the opportunity to lower your insurance costs by taking it off of your insurance policy. As long as your car has a valid registration it needs to have state minimum coverage.
Failing to keep the minimum requirements could cause trouble when it’s time to sell the car to a serious buyer.
How Terminating Your Coverage Too Early Could Affect a Sale
You don’t have to be caught driving without insurance to get yourself into trouble for canceling coverage on your car too early. If you terminate the policy, the DMV will be notified electronically that there is an insurance lapse. When this happens, the registration is suspended.
The last thing you want to do is sell a car with a suspended registration. This can create problems for your seller and can also affect your reputation as a seller in the area.
Not only this, but you’ll get stuck paying fines and could even be cited on a short test drive. It’s best to keep your insurance or surrender your plates.
The Drawbacks of Surrendering Your License Plates
One alternative to keeping insurance on your car is to surrender your license plates. In doing this, you will file your car as non-operational through the DMV. One of the problems with doing this is that vehicles listed as non-operational can’t legally be taken on test drives.
If you wanted to sell a vehicle that is running, chances are each and every prospective buyer will ask for a test drive.
You can imagine how taken back someone might be when they’re told that they can’t test out the car on the open road. Unfortunately, you could get into serious trouble if you decided to break the rules and let them drive.
When can you legally cancel insurance on a car?
You need to have coverage in your name for the test drive. The prospective buyer isn’t listed on your policy, but you will have liability coverage that protects your finances if there’s a crash.
After all, the victim in the accident can seek compensation from the vehicle owner if the operator doesn’t have their own coverage.
Since it’s the legal owner’s responsibility to buy insurance and keep it active, you shouldn’t cancel coverage until the car is officially sold. That means that you need more than just an offer, you need a sale agreement and a signed bill of sale. Be sure to have the money in hand before you make adjustments to your policy.
Submit a Release of Liability
In the eyes of the DMV, you are still the owner on file until the buyer registers the car in their name or until you release liability. The best way to protect yourself is to submit your release of liability form right after the buyer drives away.
This means you won’t be held accountable for accidents and you don’t have to maintain insurance on the car.
Will my coverage pay for claims after I’ve sold my car?
If you sold a car to a friend and you still haven’t canceled the insurance, don’t expect your insurer to pay when there’s a claim. After ownership transfers to the other party, you no longer have an insurable interest in the car. Since this is a requirement with all personal auto policies, you can’t file a claim.
What happens if you don’t cancel the policy?
If you forget to cancel your policy, it will stay active until you submit a cancellation request. If you have automatic payments set up on your account, cancel them or the drafts will keep coming from your account.
When you fail to make payments, the policy will cancel for non-payment. Letting the coverage cancel for failing to pay your bills isn’t advised. This could affect your reputation with carriers and your rates. Just sign a request and the policy will be canceled effective on the date of sale.
If you’re going to buy a new vehicle in the near future, hold off canceling your insurance and suspend it. This will help you keep discounts without having to pay for coverage you don’t need. If you want to price the cost of insurance with other carriers, use an online rate comparison tool and start getting quotes.