Do you need insurance to transfer a car title?

What is a car title?

A car title is a legal document issued by the state that identifies the vehicle owner. The title usually lists the vehicle identification number (VIN), the make, model, year, color, mileage, owner's name, and address, as well as the document's issue date. It will also include signatures from the buyer, seller, and the person representing the state. If there's a loan on the car, that information would be in the title.

The title serves as proof of ownership. Transferring a car title takes place as part of a car sale, whether the vehicle is new or used, purchased from a dealership, or purchased privately. The document shows who owns the vehicle and therefore is legally permitted to sell it. A vehicle title is different from a vehicle registration; a registration, required by state law, is a state document that establishes the vehicle's official driver of record. Learn more about the difference between a car title and car registration.

When does a car title get transferred?

The car title must be transferred any time the vehicle's ownership changes. A dealership usually manages the title paperwork in a sale. For a buyer purchasing a vehicle privately, the process can be more complex, typically involving the seller signing the title over to the buyer, releasing ownership. At that point in the process, the buyer must take the signed title to the state's department of motor vehicles to register the vehicle.

If you're the seller, you should check the title and ensure that you're the sole owner. If a financial institution or lender, called the lienholder, is listed on the car title, then there is an auto loan in place that needs to be paid before any sale. Sometimes the title will have two names (in the case of joint ownership).

Do you need insurance to switch a title over?

Auto insurance requirements for a car title change can vary by state and circumstance. Dealerships and lenders usually want proof of insurance before transferring vehicle ownership. Lending companies might go further and require that the borrower have specific auto coverage, such as collision and comprehensive, that helps protect their investment. Learn more about car insurance requirements by state.

The state agency that manages titles (often the department of motor vehicles or department of transportation office) sets the rules. In private sales, including those that are cash-based, the state might ask the seller to show proof of insurance to transfer a car title. Lack of insurance could result in a fine in those states. Even if the agency says you don't need insurance for a title change, the buyer must have coverage to register the vehicle.