Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • Insurance is specifically designed based upon the car you have
  • You need to contact the insurance company when you sell your car
  • There are options available when you change cars to get a more affordable premium

Selling your car voids your insurance policy because your policy is based on the kind of car that you drive.

If you sell your car and replace it with another car, you need to know how to make the necessary updates.

This update will ensure you have a valid policy in the event you are stopped by law enforcement or anyone else. Compare car insurance quotes and see how much you could save!

How Car Insurance is Calculated

It’s important to look at how car insurance is calculated. One of the main pieces of information you provide for an insurance quote is your VIN number. If you sell your car, your insurance policy becomes instantly invalid because the insurance card is incorrect.

Most insurance cards have the VIN number of the vehicle listed on it so that law enforcement and other entities can determine if your insurance is valid.

If the insurance card doesn’t match the vehicle you’re driving, then you don’t have a valid policy.

Driving without insurance can result in fines as well as the possibility of having to go to the court in order to prove that you do have a valid car insurance policy on the vehicle you are driving.

Insurance is based on a variety of different factors, including:

All of these factors contribute to the cost of the policy. Further, they will determine whether your policy continues to be valid.

If you move, change vehicles, or even add safety features, then you need to communicate these changes with your insurance company. The slightest change could increase or decrease the cost of insurance.

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Communicating with Your Insurance Company

Your insurance company needs to be the first one to be notified of any changes as it pertains to your car insurance policy. If you sell the car that’s listed on your policy, they need to know so that the policy can be canceled.

After all, if you have no car, then there’s no need to pay monthly premiums. Any premiums you have paid in advance will also be refunded to you.

If you get a new car, then you have to provide the insurance company with all of the details. This information will allow them to draft a new quote based on the new car’s information.

Depending on mileage, safety technology, and value, the policy might be more or less.

Additionally, if you move, the insurance company has to be notified as well. The zip code determines where you’re located.

More traffic and more accidents near where you live will result in a higher risk and therefore you will be charged a higher premium. If you move to a safer location where there are fewer car accidents and fewer crimes, your premium may decrease.

Getting a New Policy

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Any time you get a new car, you have to get a new policy. You choose to get the policy with the same company you currently have or by switching to another company.

With a new car comes finding the right coverage. You must adhere to state minimums for liability coverage as well as determining if you want to go above the minimum limits.

If your new car is leased, you will also have to look to see if the lienholder has additional requirements. These requirements might include collision as well as comprehensive coverage.

It is the lienholder’s way of protecting their investment until they get custody of the car once again at the end of the lease.

The last thing you want is to have an invalid insurance policy in place. Anytime you sell a car, you have to notify the insurance company. If you simply sold your car and did not replace it with a new one, the policy needs to be canceled.

Otherwise, if you bought a new car (or leased it), you need to update the details with the insurance company. You can also choose to get quotes from other insurance companies to try and get the most affordable premium available to you.

Enter your zip code below to compare quotes from several car insurance companies side-by-side.