Only contact your insurer to cancel the policy after you've received the full payment, completed a bill of sale and signed the title over to the new owner. In some states, you also have to submit a notice of the sale to the department of motor vehicles (DMV); if that's the case where you live (you can find out by visiting your state DMV page), wait until you submit that notice to cancel your coverage.
Timing matters whether you’re thinking about insurance when selling a car privately or insurance when trading in a car at a dealership.
Related reading: “When to Review Auto Insurance Coverage”
Can I keep my current car insurance coverage if I buy a new car?
If you have an existing auto insurance policy when you sell or trade in a car, you typically have a few days to update your policy with your new vehicle's details. Until then, your policy applies to the new car.
However, your current coverage may not be adequate for your new car. For example, if you have liability-only coverage and are financing a new car, the lender will require you to purchase coverage with comprehensive and collision insurance, sometimes referred to as "full coverage policies." And, if you’re purchasing a more expensive vehicle, you may want a car insurance policy that adds these forms of coverage – and adjust your coverage limits – to sufficiently protect the car.
If you’re comparing options, “Types of Car Insurance” and “How Much Car Insurance Do I Need?” can help you decide whether your next car needs different protection.
Questions to help get the best car insurance coverage
When considering what insurance policy to get for your new car, ask yourself the following questions:
- How much would it be to replace the car? If you only have liability coverage with your insurance company, your car isn't covered if it's damaged or totaled in an accident; you have to pay for it entirely on your own. For an older, high-mileage vehicle, you may choose to accept that risk. But, if you have a newer car that costs well into the five figures, you may need a policy that includes collision and comprehensive insurance.
- How much do repairs typically cost? Some cars are relatively inexpensive to repair. For instance, Consumer Reports found that Buick, Toyota and Hyundai were usually the cheapest to maintain and repair. By contrast, Volvo, BMW and Infiniti were among the most expensive. If you have a car with higher repair costs, consider adding collision and comprehensive coverage or increasing your policy limits.
- Could you save by switching insurance companies? If you aren't sure what coverage you need, speak with an insurance representative. They can help you find the right coverage and identify potential auto insurance discounts. However, before you decide to get a new policy from a different insurer, check on whether the current company will impose a cancelation fee for ending the old one. Some insurance companies impose these, as either a flat fee ($50 is a common amount) or a percentage of the premium for the remainder of the policy’s term.
If you’re still shopping for a replacement vehicle, “Buying a Used Car: What to Look for and How to Check a Car Before Buying”, “Guide for the First-Time Car Buyer” and “Should You Repair or Replace Your Car?” may help you narrow down your options.
