If you sell your car, is your insurance still valid?

If you sell your car, your insurance is still valid in the sense that you can keep the same insurance company if you wish to insure another vehicle with them. Otherwise, once you sell your vehicle, you must submit a release of liability to the DMV.

Compare Cheap Car Insurance Quotes

secured lock Secured with SHA-256 Encryption

Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

Full Bio →

Written by

Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

Full Bio →

Reviewed by Brad Larsen
Licensed Auto Insurance Agent Brad Larsen

UPDATED: May 12, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right cheap car insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident car insurance decisions. Comparison shopping should be easy. We are not affiliated with any one car insurance company and cannot guarantee quotes from any single company.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare cheap car insurance quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about car insurance. Our goal is to be an objective, third-party resource for everything car insurance-related. We update our site regularly, and all content is reviewed by car insurance experts.

Here's what you need to know...

  • When you buy auto insurance in your name, you’re stating that you have an insurable interest in the vehicle that’s covered on the policy
  • It’s important that the names listed as the named insured on the policy and the registered owner on your registration match. If these names don’t match, the DMV may fine you for not having the coverage that’s required by the state
  • When you’re selling your vehicle, you need to keep active insurance on the car until you have an offer and the buyer signs a bill of sale
  • It’s important that you submit a release of liability to the DMV right away so that you aren’t on file as the owner. This will ensure that the buyer is held responsible for complying with the insurance laws instead of you
  • Your insurance will stay active until you cancel it or it cancels for non-payment. It’s important to notify your insurer when the vehicle has sold so that the policy can be updated or canceled

Selling your car on your own has its advantages. Not only can you avoid the low-ball trade offers that dealers quote you, but 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.

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 to learn more.

If you need car insurance, enter your ZIP code into the FREE tool above to get started searching for the perfect coverage today!

How Terminating Your Coverage Too Early Could Affect a Sale

You may be wondering, “If I sell my car, is my insurance still valid?” 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, according to the Department of Revenue.

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. The Department of Motor Vehicles states that It’s best to keep your insurance or surrender your plates.

Compare quotes from the top car insurance companies and save

secured lock Secured with SHA-256 Encryption

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 the 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.

Compare quotes from the top car insurance companies and save

secured lock Secured with SHA-256 Encryption

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.

Enter your ZIP code below to compare car insurance rates from multiple companies at once!

Compare Cheap Car Insurance Quotes

Compare quotes from the top car insurance companies and save

secured lock Secured with SHA-256 Encryption