Why won’t they let mom cancel car insurance?

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Q. My mother sold her car. Her insurance company, Allstate, said they won’t remove my mother from the insurance unless she shows proof that she’s returned her license plates to motor vehicles. She’s planning to do this, of course, but couldn’t do it right away. Is there an insurance law in New Jersey that requires this?
— Trying to help

A. We took your question directly to Allstate.

What this comes down to is documenting the date of the sale of your mom’s car so an insurance company can adjust the premium – or give your mom a refund – from the date her car was sold.

It couldn’t comment on your mom specifically, but in general, it said there could be a difference in whether your mother sold her car to a dealer or in a private sale.

In the case of purchasing a vehicle from a dealer that involves the trade-in of a vehicle insured by Allstate, it said it typically processes the removal of the trade-in from the policy and adding a purchased vehicle at the same time. The dealer paperwork documents the transaction, Allstate said.

A private sale can be more complicated.

“In general, if a customer requests the coverage removal within 30 days of the sale, Allstate New Jersey does not require any proof of the transaction to be provided,” an Allstate spokesperson said. “That said, each Allstate agency may have their own internal practice to obtain some type of documentation of the sale to safeguard the agency from any potential misunderstandings and/or errors and omissions related to coverage changes.”

If the request for coverage removal is received by an Allstate agency 30 or more days after the sale, it is Allstate’s policy – not New Jersey law – to request proof of the sale. This is to show the customer no longer has an insurable interest in the vehicle, meaning it is no longer owned by the insured and they no longer have possession of the vehicle.

“Some of the documents we would accept are a bill of sale, a cancelled lease document, or anything else showing the vehicle was sold or turned in,” the spokesperson said. “Proof of license plates being returned to the New Jersey Motor Vehicle Commission would be an example of the latter.”

Once the proof is in, the insurance company can adjust the premium and minimize the potential for insurance fraud, it said.

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This story was originally published on June 18, 2019.

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