Generally, it is to your financial benefit to cancel auto coverage on a car immediately after a sales transaction is complete. After all, you don't want to pay for protection on a vehicle you no longer own. Insurers usually reimburse unused portions if you pay ahead. However, you do have to consider the potential gap in coverage if you don't buy another car right away.

Insurance Considerations

If you buy another car at the same time you sell, you can simply contact your insurance agent and notify him of the vehicle change. The tricky scenario occurs when you sell a car and don't buy another right away. If you have other cars on your policy, you likely don't have a problem. However, if you don't, you risk having no coverage. Without insurance, an accident you cause in a rental car or borrowed car leaves you exposed. Timing your cancellation with a new purchase is often best.