Can I cancel my car insurance if I sell my car?

Selling your car can be a stressful process, so it’s easy to overlook some necessities, such as cancelling the various costs associated with it, from tax, to parking permits, to your car insurance.

Cancelling road tax is easy these days as it’s now done automatically when you inform the DVLA of a change in the car’s ownership, but you’ll need to be more proactive about cancelling your car insurance when you sell your car – and that’s what our guide is here to explain.

Below we’ve explained what happens to your insurance when you sell your car, when you should cancel after your car has sold, and what refunds you’re likely to get when cancelling your car insurance policy.

What happens to my insurance if I sell my car?

Nothing much happens to your insurance policy if you sell your car unless you make it happen - this is definitely one of those situations where you need to be proactive and do something about it yourself.

If you sell your car and aren’t immediately replacing it with another – which we’ll come onto in a second - then you ideally want to cancel your insurance policy as quickly as possible. One reason is purely pragmatic: you probably don’t want to be paying for something you’re no longer using, and once you’ve got the money for selling your car, and the buyer has the car, the keys, and the appropriate part of the V5C logbook, then you’ve no more obligation to pay for the insurance than you do its fuel or tax.

There are good legal reasons for promptly cancelling your car insurance too though. Your insurer will need to know that you’re no longer the owner of the vehicle and that they’re no longer responsible for coverage if a claim is made against the new owner or something happens to the vehicle.

Should I keep my insurance when selling my car?

There’s one good reason you might want to keep your insurance policy when selling your car, and that’s if you’re immediately replacing it with another car and want to carry over and adjust your existing insurance, rather than cancelling and starting from scratch.

There will usually be some kind of cost to this, for administration purposes, and if your new car is costlier to insure then your monthly payments or annual premium will also go up to take this into account. But it could be more affordable than taking out a whole new policy, and will allow you to continue building a no-claims bonus for the given year, ready for renewal time.

No-claims is one reason you might consider keeping insurance even on a car you’re not replacing, though it’s worth getting in touch with your insurer rather than just letting the policy run on. If you’re still several months away from getting an extra year of no-claims, then the cost of insuring a car you don’t own probably won’t be worth next year’s small price drop (if it drops at all). But some insurers may offer to count an extra year of no claims bonus anyway if you’ve done say, 10 or 11 months on a policy before selling a car.

Can I sell my car without insurance?

You don’t need to be insured on your car at the time you sell it, though how much this matters depends on what you’re selling and how you’re intending to sell it. If you’re selling an old project car that hasn’t run in years, and someone is coming to take it away on a trailer, then whether you’re insuring that car or not is fairly immaterial – though if that car has value to you, it’s still wise having some kind of policy on it during the time you own it, to cover things like theft, damage, or fire while it’s laid up. You would then cancel this insurance once you’ve sold the car, much like any normal policy.

If you’re selling a car you’re still actively using prior to sale though, you should keep that car insured until the car has sold. If you’re caught driving without insurance, you could be given a £300 fixed penalty and six penalty points on your licence, and penalties extend to bigger fines and driving disqualifications if it goes to court. You should only cancel your insurance after selling the car, in this instance.

Can I get a refund if I cancel my car insurance?

In many cases, you will be eligible for a refund on your car insurance if you sell your car and then cancel before the policy term is out, though there are a few caveats, which we will go into more detail on below.

Can I get a refund on my car insurance?

This depends on your insurer’s small print and how many months you have left on your policy. If you have several months left to go you’ll probably get a refund if you’ve paid for the year up front, and if you pay monthly, then you simply won’t have to pay those subsequent months. You may not get a refund if there are only one or two months left to go on the policy and insurers tend to charge an admin fee for policy changes, including early cancellations, so you’ll have to take this into account, too.

Cancelling during the cooling-off period

Financial Conduct Authority rules mandate a 14-day ‘cooling-off period’ on insurance to allow customers to consider their purchase and change their mind with no penalty, and without giving any reason. While you may still be charged an admin fee – insurers love ‘em – you’ll at least get a full refund on anything you’ve paid.

Cancelling outside the cooling-off period

Once the 14-day cooling-off period has ended, then things are slightly different. Just as you would when cancelling six months or nine months into a policy, you can expect a refund on unused insurance. This comes with the same caveats, in that it’s unlikely to be a full refund equivalent to every month left on the policy – and of course, there’ll be the usual admin fees.

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