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A car title is a legal document proving who owns a vehicle and, therefore, has the right to sell it. Whenever that car is sold, the title must be transferred to the new owner, though the process looks different in each state.
In many states, you don't need proof of insurance to transfer a car title when buying or selling, though some require it for one or both parties. Either way, though, buyers nearly always need insurance to register the car in their state.
Your responsibility to have auto insurance in a title transfer can depend on your state laws and the type of sale.
Is Car Insurance Required for Title Transfers?
The answer is, unfortunately, it depends. One factor is your state, since each sets its own laws on car title transfers. Some require proof of auto insurance to buy and sell.
It also depends on whether you're selling or buying a car, and whether it's a private sale or through a dealership (the latter typically has stricter requirements). Here are some basics to know depending on whether you're the buyer or seller.
Buyer
When purchasing from a dealership, the dealer typically requires buyers to show proof of insurance before the title can be transferred, since most states won't allow the driver to register the car without it. If you finance the car, lenders might even require a specific type of insurance coverage to protect their investment.
It's less common for states to require proof of insurance in private sales. Some may request a private-sale buyer to show the seller evidence of insurance before purchasing, while others don't.
Keep in mind that transferring the car title in your name is only one step of taking ownership. You also have to register it with your state's motor vehicles department to drive, and nearly all states require proof of insurance for this.
Seller
If selling to a dealership, they typically require that the car is insured. And remember that if your car isn't insured and something happens when you're driving it to the dealership, you're on the hook.
Some states require private sellers to see proof of insurance from buyers before selling the vehicle and signing over the title. Others don't. If you plan to sell privately, review guidance from your state's department of motor vehicles so you understand your obligations. Failure to confirm proof of insurance when it's required can lead to fines. Also, even if you're not required to have the car insured, selling an uninsured car could be concerning to a potential buyer.
Regardless of how you'll sell, know that states usually require having auto insurance on any vehicle you own, even if you're not driving it or are planning to sell it. If your state finds out you still have a car registered in your name without insurance, penalties could range from fines to license suspension.
Additionally, until your car title is transferred out of your name, you're responsible for it. Say you cancel your insurance and are selling your car privately. If you let a buyer test drive it and they get into an accident, you're technically responsible, and without insurance, the cost could be steep.
Experts suggest you don't cancel your car insurance until after the title is transferred and the sale is completed. And you shouldn't cancel your policy altogether if you'll still drive another car; this creates a lapse in coverage, which could mean higher rates on future policies. It's generally better to keep your current policy, remove your old car and add your new one—just know rates can change depending on the new vehicle.
If there will be a gap in between selling your vehicle and buying a new one, you could get a non-owner car insurance policy to avoid a lapse.
Also, if you have insurance and sell privately, you may encounter a buyer without insurance who asks you to extend your insurance policy for them. Insurer Liberty Mutual warns against this, since the other driver can't use your policy and claims will be denied as soon as the car title is transferred.
Examples of Varying State Regulations on Transferring Titles
Given how much state requirements vary around insurance and transfering car titles, it's best to check with your state's motor vehicle or transportation agency so you're clear on what's needed for each party.
To exemplify the variety of state laws, here are three examples:
Maryland
There's no requirement for buyers in private sales to provide proof of insurance to sellers or vice versa.
However, the owner is required to have the car insured up until the moment they sign over the car title and send their plates to the government. If you cancel your auto insurance before you return the license plates from your newly sold vehicle, you can get hit with a big fine.
Pennsylvania
In Pennsylvania, buyers don't necessarily need auto insurance to get a car title in their name, but they can't register the car or get license plates without proof of insurance, regardless of whether it's through a private sale or dealership.
Private sellers must remove the car's license plates after handing over the keys. The buyer can't obtain a temporary or permanent license plate or register the vehicle without showing proof of insurance to an authorized agent of the Pennsylvania Department of Transportation. That means no driving until you have valid insurance.
Oklahoma
This state's rules are stricter; buyers can't even get a title transferred, let alone the vehicle registered, without having proof of car insurance.
If you've purchased a car privately, you'll visit an office of the state's transportation department to transfer the title. You'll need documents including proof of liability insurance. If you purchase through a dealership, they're required to send your proof of liability insurance, along with other documents, to the state to transfer the title to you. So without insurance, you won't be able to legally buy or own a car there.
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How to Navigate the Process Without Insurance
If you have no car insurance, you likely won't be able to buy a car, new or used, from a dealership since you can't complete the titling and registration process.
It's easier in many states to transfer titles without insurance via a private sale of used cars. However, the earlier example from Oklahoma shows in some places, even that isn't possible.
Other states, like Pennsylvania, allow vehicle purchases without insurance—but not obtaining a title or plates, meaning it's not legal to register or drive the car uninsured.
Even if it's not required in your state, it's smart to have at least basic insurance coverage throughout the buying and selling process. If you're selling an uninsured car and you allow potential buyers to test drive your car, you're responsible for any damage. Additionally, depending on your state, the owner and/or the driver can face fines and penalties if caught driving without insurance.
The Bottom Line
The rules on auto insurance and transferring car titles can vary quite a bit from state to state, and depending on whether you're selling or buying and the method of the sale.
Penalties for not complying can result in anything from fines to loss of your license, and it can prevent the successful transfer of a car title and/or registration. The safest bet is to look up or contact your state's transportation agency to understand what's required of car buyers and sellers. It's also ideal to be insured, regardless of your role. Getting car insurance isn't cheap, but it protects you legally and financially, and it makes the process of buying and selling a car smoother, especially if your state has strict rules.