The process of transferring car title itself doesn’t require you to have car insurance. However, you will require insurance coverage if you want to legally drive your car. Moreover, auto insurance is only important when you are all set to register your vehicle with the state, whereas, general ownership of a vehicle only needs to be documented with an official auto title.
Generally, people need to transfer a car title when they are either buying or selling their vehicle. Remember, the insurance requirements of your state are a separate thing from the process required for documenting changes in the ownership of a car.
Although you will need car insurance in order to be able to drive your vehicle on a public road, it is not actually necessary for transferring an auto title.
Transferring a Car Title
When it comes to transferring a vehicle’s title, every state has different requirements. If you are purchasing a car from a car dealership, the dealership will most certainly take care of everything related to transferring the car title in your name.
On the other hand, if you are buying a used car, the requirement may differ in your state to transfer the title. For example, you may be asked to provide the vehicle identification number, current odometer reading, and a bill of sale as proof of your purchase.
Make sure when you are buying a used vehicle, you actually get the used vehicle free and clear of any liens on the title. If you ignore this, you could encounter some unpleasant surprises in the future. A lien on your car’s title can affect your ownership interest. Also, before completing the title transfer process, both the transferor and transferee should verify the accuracy of the odometer listing and other information. For instance, if the actual odometer reading is not correct, the seller must be asked to give an estimate of the actual reading.
Transferring Car Title for Financed Cars
If your car is financed, your name will be on the car title. However, the actual title certificate will be with the lien holder. In simple words, this means that if you end up purchasing a vehicle through a loan, then you don’t get to keep the auto title. Unless the loan is paid, the title will remain in the possession of the lienee. You will have the vehicle with you but according to the record, the official owner will be the lender or lienee. This is the reason car insurance is required for your loan. Since you are the one who is going to drive the car, you are technically the one with an insurable interest in the car. Hence, it is your responsibility to keep insurance according to the loan agreement and state law. Many lenders make it a condition that the borrower must maintain full coverage of the car because if something happens to the vehicle during the loan repayment, the lender could lose the value of the underlying asset. Lenders usually ask the borrower to have adequate coverage before they agree to transfer the title to your name.