Transferring Car Title: Do I Need Insurance?
The process for transferring a car title does not require car insurance, but you'll need insurance coverage in order to legally drive the vehicle. Auto insurance requirements only come into play at the stage of registering a vehicle with the state, while general ownership of a car is documented with an official title. Transferring an auto title online is possible through your local DMV's website.
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UPDATED: Apr 3, 2022
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- Ownership of a vehicle is documented through an official car title
- It is possible to transfer a title to a vehicle to a new owner without the new driver having to show that he or she has insurance
- The title to your vehicle is a very important document to hold onto. It is best to keep it in a secure location separate from your car
Typically, the reason that you would need to transfer a car title is because you are either buying or selling a car. Insurance requirements for your state are separate from the procedures for documenting changes in the ownership of a vehicle.
Even though you need car insurance to be able to drive on a public road, it is not actually necessary to effect the transfer of a car title, however proof of insurance is required in order to be issued a temporary tag.
If you will be transferring your title, ensure you have the best rates by comparison shopping with our FREE tool above!
Transferring a Car Title
Each state has its own particularities when it comes to transferring a car title. If you are buying a car directly from a car dealership, the dealership will probably take care of most of the details of transferring the car title in your name for you.
Even though car insurance is not a required part of the title transfer, it is still going to be necessary for you to eventually drive your new car off the lot and on regular roads.
On the other hand, if you are purchasing a used car, there may be other requirements in your state to effectively transfer the title.
For example, you may be required to list the vehicle identification number (VIN), the current odometer reading and provide a bill of sale that shows proof of your purchase of the car.
An important thing to watch for when you are involved in the transfer of a title for a used vehicle is that you are actually getting the used car free and clear of any liens on the title.
If you do not check for this, you could be in for a very unpleasant surprise in realizing that there are actually encumbrances on the vehicle title that affect your ownership interest.
Prior to completing the title transfer, the transferor and transferee must verify the accuracy of the odometer listing and all other information on the certificate of title.
If the actual odometer reading is inaccurate, the seller must give an estimate of what the actual reading should be.
If the vehicle is financed, your name will be on the title, but the actual title certificate will be in possession of the lien holder.
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Car Title for Financed Cars
If you end up financing your car through a car loan, then you do not actually get to keep the vehicle title until your loan is paid off.
Even though the lender is the official owner of record for the car, you still have possession of the vehicle.
This reason is why car insurance is required for your loan.
Since you will actually be driving the car, you are the one with an insurable interest in the vehicle and the responsibility to keep current insurance under the terms of the car loan agreement as well as state law.
Many lenders go above the state requirements for car insurance and require that the borrower also has collision and comprehensive insurance for the financed vehicle.
If something catastrophic happens to the vehicle during the loan repayment, then the lender could lose the value of its underlying asset.
To protect the asset, the lender makes it a condition of the financing agreement that the borrower maintains full coverage on the vehicle.
If you need to find full coverage for a financed car, you do not necessarily have to go straight through the lender to get an insurance company.
Be prepared with information on the type of car you are financing, such as the year, make and model, because this will help determine what rate you are offered.
How Your Vehicle Registration is Different from a Car Title
Car registration requirements are governed by state law and go beyond simply showing the ownership interest in your vehicle.
Car registration involves documenting the official driver’s license information for the official driver of record for the vehicle.
If you move across state lines, you will want to make sure that your vehicle is properly registered with the state within a certain time frame.
At the point that you register your vehicle with the state, there is typically a check for a valid form of car insurance.
Depending on the state, your insurance company might be able to submit the proof of valid coverage directly to the state department so that you can register your vehicle.
It’s a good idea to keep the official copy of the title to your car in a safe location like a fireproof box or in your vehicle.
You may need to show your registration to a police officer during a traffic stop. You would never be asked to show your title to your vehicle in a traffic stop.
Final Thoughts on Transferring Titles
If you transfer a car title, you are basically indicating that there has been a change in ownership of the vehicle. This is different from officially registering a car or truck with the state.
When you buy a new car from the dealer, the title transfer process is very easy and typically involves the dealership handling most of the forms.
Auto insurance requirements only come into play at the stage of registering a vehicle with the state.
It’s a good idea after the title is transferred, the seller should remove the license plate from the vehicle.
Although car insurance is not necessarily a legal requirement to take possession of a car, car dealerships or lenders may require that you have adequate coverage before they agree to transfer the title of a new or used car to your name.