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Understanding New Jersey Auto Insurance and Car Titles

Close up of car title

Whether you are buying or selling a vehicle in a private or dealer transaction, transferring a car to a family member, or adding a new driver to a vehicle that you are financing, you may have questions about how a vehicle’s title relates to the insurance policy for that vehicle. Read on for detailed answers on several of the most frequently asked questions about auto insurance and the title to a car.

Can you insure a vehicle you do not own?

Unless you have a financial interest (ownership or part ownership) in the car, the short answer is “no.” For example, when you transfer the title of ownership in a sale of your car to your adult son or daughter, they need to obtain their own auto insurance policy. Sometimes parents make the mistake of selling their car while keeping the insurance policy in their own name – big mistake! If you want to help your child financially in this case, the best route is to help with the premium on a car insurance policy that is in their name. Keep in mind that if you co-sign for a car purchase, you do have a financial interest, and may be able to insure the vehicle in your name, provided that the name of the person who is normally driving is also listed on the policy as a driver. Some insurers may require the co-signer to be listed as “Additional Interest” or some other category indicating only a financial interest. The insurer may require the owner of the policy (Named Insured) to be the registered owner of the vehicle, in which case a vehicle registered to the child may require their own policy – not added to the parent’s policy, even if the parent co-signed the loan. 

An exception to the ownership/financial interest would apply in the case of a temporary rental car. If you carry comprehensive and collision coverage, your auto policy will typically cover rental cars if you are the renter and you or someone else listed on the rental contract is driving the vehicle. 

Can I obtain car insurance without showing the title?

Usually, you can get car insurance without having to show proof of your title; however it depends on the insurance carrier. Some carriers may require you to show proof of the car title prior to offering a policy, and that is at the insurance company’s discretion.

Why do insurance carriers want my name on the title?

The key concern here is risk management. When you sign an auto insurance contract, you are transferring risk to an insurance carrier, which requires both parties to abide by the agreement. Your auto insurance carrier wants to know who and what they’re insuring, and they are obligated to ask questions to determine risk factors. When your name appears on the title of the car the carrier is insuring, the insurance company can have some confidence that you have a financial interest in protecting that vehicle as your own property.

Do I need to transfer a title on a dealership trade-in?

Car dealerships have finance and insurance professionals on site, which can make a title transfer a little smoother than a private sale. Regardless of whether you hold the title to your car (meaning you own it free and clear), or you’re still making monthly car payments to your local bank, you will be required to transfer the title upon the sale of that vehicle. If you hold the title, the dealership will require you to produce it; however, if the bank holds it, they will require the lien to be paid off before surrendering the car title to the dealership. Again, the finance and insurance professional at the dealership is experienced in handling these transactions and is there to assist you in this process.

Do I need insurance to transfer a car title in a private sale?

To be on the safe side, yes. While there may be rare occasions in which an individual owns a vehicle that is not registered and not ever driven, any and all registered vehicles in NJ must be insured. Insurance should be maintained as it’s not worth exposing yourself to any liability in the time period that the title and registration are being transitioned to the buyer, especially knowing that it will likely take the buyer at least a short period of time to establish their own car insurance for the vehicle.

Do I need to transfer my car title in a private sale?

Yes, and it’s imperative that you do so. Many people make the mistake of not transferring their car title to the new owner, especially when the buyer is a friend or family member. As the seller of a car, it’s your responsibility to sign over the title to the buyer of your car. The person who has purchased your car will then need to visit the department of motor vehicles (DMV) and present the signed title. The state will then issue a new registration and title to the new owner of the car. In addition to a signed title, the state of New Jersey also requires the “New Jersey Bill of Sale,” which is a legal document that proves change of ownership. Although most New Jersey bill of sale documents will not require notarization, this document will need to be signed by both the buyer and seller and presented to the DMV before the new owner can obtain a new registration and title. The buyer will also need to complete and submit a vehicle registration application (Form BA-49) to the DMV.

Final Thoughts on Auto Insurance and the Title to a Car

Questions about car titles usually come up when there is a potential transaction that involves buying or selling a vehicle. Remember, the title of a vehicle represents the OWNER, whereas the insurance policy covers the CAR. If you encounter a situation that involves a transaction, or a new driver of your car, and you have questions regarding your auto insurance or car title, contact Plymouth Rock Assurance. Exclusive affinity programs, flexible policy structure, safety discounts, rewards programs and exceptional service are just a few of the many reasons Plymouth Rock is the auto insurance carrier of choice for New Jersey drivers. To help you with your insurance needs, Plymouth Rock offers more information about companies that are affordable and details about mistakes you should avoid when purchasing.

Call 855-993-4470, get your free quote online or find a local agent to see how Plymouth Rock Assurance can help you understand auto insurance and the title to a car and help you with the coverage you need.