Do You Have to Wait for Your Car Insurance to Expire for it to Cancel?

If you sell your vehicle or want to take it off the road, do not allow your car insurance to expire. Many states require registered vehicles to maintain an active liability policy, so you may face fines or a license suspension if you do not return your plates. In addition, you are wasting money by continuing to insure a vehicle that you no longer drive.

Selling Your Vehicle

If you sell your vehicle, promptly remove your plates and cancel or transfer your insurance to another vehicle. Do not allow a buyer or dealer to keep your plates; returning the plates to a motor vehicle office is your responsibility. If you fail to notify your state of the sale, you may face future liability issues for the vehicle. If the new owner abandons the car, receives tickets or has an accident, you may be charged or fined as the last known owner.

Call Your Insurance Company

If you want to take your car off the road, your car insurance agent can let you know how to do so legally and whether you can cancel the entire policy. Some states require you to return your plates before canceling your policy; your agent can further instruct you. Some insurance companies can backdate your cancellation to reflect the day you sold your car or returned the vehicle's plates. Because you normally prepay your policy one month ahead of time or longer, you will receive a refund for your early cancellation. You may also have to sign cancellation documents.

New Insurance

If you want to cancel your old insurance policy because you've found a new provider, ask your new agent if it can cancel the old policy for you. Rules for insurance cancellation differ by state, so be sure to talk to an authorized insurance agent. You may have to call your old provider to let them know you have new coverage and sign forms stating so. Don't just let your car insurance expire; this can cause problems with your state motor vehicle office.

Considerations

Some states require licensed drivers to remain insured even without a registered vehicle, so letting your policy expire may not be an option. Your policy cost may also rise in the future. If you received tickets or had an at-fault accident since your original policy was issued, your insurance won't be affected until it's time for renewal. Before you cancel your insurance, talk with your agent about the possible financial repercussions of doing so. It may benefit you to lower your limits during the time being.