How Auto Insurance Impacts Selling Your Car

There’s a lengthy checklist when it comes to selling your car in Texas, whether you’re selling to a neighbor or a nationwide service such as CarMax or Carvana. While you’re gathering paperwork and bracing for price negotiations, don’t forget about auto insurance.

When the timing’s right — ideally after the sale is complete — you’ll need to transfer or cancel your auto insurance policy. Understanding auto insurance’s role before, during, and after the sale can protect you from liability and keep you from paying for unnecessary coverage.

Here’s a look at what you need to know at every stage of selling your car.

Before the Sale

Keeping auto insurance active and up to date is critical, especially if you’re selling to an individual who might be test-driving the vehicle.

When selling to a dealership or entity such as CarMax or Carvana, the company’s insurance usually covers liability and property damage during a test-drive. But, when selling to a private buyer, coverage is typically left up to the seller’s auto insurance. When in doubt, give your Agent a call.

When organizing a test-drive with a private buyer, choose a safe, low-traffic route in a public place, and plan to meet during the daytime if possible. Before the testdrive, ask to see their driver’s license and take a photo. Not only does this help verify the driver’s identity, but you might need this information if there’s an accident.

During the Transaction

It takes more than an earnest handshake and an emphatic “I’ll take it!” to complete a sale. In Texas, you’re responsible for liability coverage as long as you own the vehicle. The vehicle is yours until the title is signed and a Vehicle Transfer Notification is filed with the Texas Department of Motor Vehicles.

When dealing with a private seller, it’s best to go with them to the county tax office to make sure a vehicle title application is filed. If it’s not filed within 30 days of the sale, you could be held responsible for any tickets, toll violations, or crimes committed with your car.

When selling to a dealership or retailer, the vehicle remains in your name until it’s sold. Filing a Vehicle Transfer Notification within 30 days of the sale date protects you from liability associated with parking tickets or toll violations.

After the Sale

Once the title transfer is complete, call your Agent to either cancel or transfer your policy to a new vehicle. This call will keep you from paying for something you no longer need. If you have multiple vehicles on one policy, dropping one from the coverage could impact your premium.

Don’t stop making premium payments without officially canceling your auto insurance policy. You could end up with a lapse in coverage.

A little preparation goes a long way when it comes to selling your car. Understanding the process can help you smoothly drive into your next chapter.

Ready for your next ride? Know these four auto insurance questions to ask before buying a car.