When selling a car, you do not want to pay for auto insurance on that car after the transaction has gone through and the title is transferred. However, if you are buying a new or different car immediately, you will need to insure that vehicle from the onset. In order for there to be no lapse in coverage, you need to time your cancellation or insurance transfer just right so you are never driving uninsured. Provided you take the right steps, auto insurance cancellation is a smooth process that will yield no penalty or blemish on your credit report.
The first thing to do is to contact your car insurance company. The quickest and most effective way to do this is by calling them. Let them know your plans and the exact date that you would like the cancellation to take effect. For proper cancellation of your insurance, a letter will be sent with a cancellation form. The letter will detail the cancellation order you put in, while the form must be filled out as a matter of course. Read through the terms of the cancellation letter, sign and return it to the insurer.
Chances are, if you are selling your car, you are buying another. In order to have no lapse in coverage, align the date of cancellation with the date of purchase so you are always insured. This might only require that you notify the insurer of the exchange of vehicles. However, if you are canceling one policy and beginning another, make sure your dates match up.
There is no set amount of time you must give the insurer. As a rule, though, provide at least one week of notice to your insurer so your request has time to be processed. When selling your car, you generally have an idea of when the transaction will be complete, so set the date of cancellation to the day after. It is the responsibility of the buyer to purchase their own insurance from that day forth.
The one thing not to do when selling your car is simply letting the insurance company cancel the policy as a result of you not paying. If you decide not to pay your monthly installment for the month you will sell your car, not only could it expose you to a period of being uninsured, but it could have negative effects on your credit score. The right choice is always to give your insurer formal notice when canceling a policy. If you paid your premium in full, or even if you make payments, you could be entitled to a refund when you take the necessary steps.
Canceling your car insurance policy is important when selling your car. By following the right procedure you will insure that you are covered up until the time the transfer of ownership is complete and likely receive a partial premium refund. Additionally, it will have no negative effects on your credit report. You should always give your insurer at least five business days when canceling a policy to allow time for processing.
What is for certain is that you need to have auto insurance if you are to drive legally. Not only can it protect your vehicle in case of an accident, it can keep you from being financially liable in the event that you are to blame for an accident.