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There are a lot of steps involved with selling your car in a private sale. 

Along with the preparation of advertising and listing your vehicle, the paperwork involved with the sale, and the logistics of getting paid, there are also some steps you’ll need to take after the sale is complete. 

One of the important things to do after selling a vehicle is handling the old car insurance policy. 

This page will go over the requirements for car insurance during a private car sale. 

Car Insurance Requirements When Selling a Car

When you are getting ready to sell your car, you probably can’t wait to cancel your car insurance policy to knock one more recurring payment off your list of monthly bills.


However, you need to avoid cancelling your policy too soon. Otherwise you may face fines and penalties in the event of a collision. 

During the sale process, you should keep your vehicle insured and registered.

This will allow you to drive the vehicle as needed, and allow potential buyers to test drive the vehicle. 

If you want to really make sure you’re covered, you can contact your car insurance company to double check that a test driver would be covered if they get into an accident in the vehicle you are selling. 

When to Cancel Insurance After Selling a Car

Cancelling your car insurance policy is one of the steps you’ll need to take to remove your liability from the vehicle you’ve sold. 

This is one of the last steps you should take after selling your car. 

First, you’ll need to complete and sign all the paperwork and documents with the buyer, including:

The buyer will take these documents to the DMV to complete the transfer process and to register and title the vehicle in their name. 

After that, there are some steps you’ll need to complete yourself. 

Depending on the state you live in, you may be required to submit a Notice of Transfer and Release of Liability (or Notice of Sale) within 5 to 10 days of the sale.

This form states that you’ve sold the vehicle to the buyer and are removing your interest and liability in it. It’s a way for the DMV to update their database, and a way for you to protect yourself if the new owner is not timely in getting the vehicle titled and registered in their name.  

After that is complete and the transfer process is in the buyer’s hand, you should cancel your car insurance policy that you have for the vehicle. 

You can do this by contacting your car insurance provider and notifying them that you’ve sold the vehicle. 

It’s typically a simple process that takes no more than a few minutes. 

If there was still time remaining on your policy, you may even receive a refund for the unused portion of your premiums. 

It will be the buyer’s responsibility to get a car insurance policy for the vehicle in their name when they take possession of it. 

It can be a good idea to confirm that they’ve purchased a policy of their own before you let them leave with the vehicle. 

Car Insurance Rates After Selling your Car

Once you’ve cancelled your old policy, you’re not quite done thinking about car insurance just yet. 

Anytime you make a change to your insurance coverages and policies, your rates can be affected. 

If you’ve benefited from bundling or other types of discounts before you cancelled the policy, you may find that your rates will increase. 


When you make any significant change to your insurance, it’s a good idea to compare quotes from different providers to make sure that you’re getting the lowest rates possible.