The problem this piece addresses is a contract that keeps running after the life it was bought for has changed. You may sell the vehicle, move out of the house, or give away the appliance, yet the contract stays on your papers and the charges, or the paperwork, keep arriving. You can tell you have this problem when the item the contract names is no longer in your hands, when you are still receiving billing or renewal notices for it, and when you cannot say from memory who the contract now belongs to.
Start with the item named on the contract. Most service contracts tie coverage to a specific vehicle, appliance, or home and often record an identifier such as a serial or identification number. Read the identifier against the item you actually own. If the paper names the old item, ask the administrator in writing what it does with a contract whose covered item has left the household. Do not assume the contract simply ends. Some papers keep it alive, some end it on notice, and some leave the question unanswered.
Read the cancellation clause before you call anyone. Look for who may cancel, how that person must give notice, whether notice must be in writing, and what happens to any unused part of the contract. Check whether the refund is described as a formula the paper states, or only as a promise that a refund will be made. A clause that gives no formula leaves you asking for an unexplained figure, and you should write that question down. Also check whether cancellation after a sale of the item is treated differently from cancellation during ownership, since many papers draw that line.
Read the transfer clause separately. Transfer is a different question from cancellation. Ask whether the contract can pass to a new owner of the item, whether the buyer must apply or accept terms, whether the seller must sign or notify, and whether a transfer fee or administrative step applies. Ask what happens if the buyer never responds. A contract that allows transfer only with the administrator's approval gives the administrator the final word, so ask for that approval in writing before you hand over the item.
Ask who holds the record. Once the item changes hands, the administrator, the seller, the dealer, and the buyer may each hold a different version of the contract. Ask the administrator which name and address it has on file, and ask for a written confirmation of the status of the contract after any sale. This matters because notices sent to a former address or a former owner can lead to missed deadlines or charges that you did not expect.
Compare the rules for your state. Cancellation and transfer rules for service contracts are set by state law and by the program or statute that governs the contract, so the answer may differ depending on where the contract was sold or where the household is located. Check the governing-law line of the paper and the rules for that state on the matching state page of this site. This guide does not restate any single state's cancellation or transfer rule, and it does not say how any particular company applies its terms. For the published rosters and the as-of dates shown on those pages, use the state tables on this site rather than a summary.
Before you hand over the item, settle four things in writing. Confirm whether the contract stays with the item or with you. Confirm how any unused portion is refunded and to whom. Confirm whether the buyer can take the contract over and what the buyer must do. Confirm which address and name the administrator will use for any later notice. A short written reply covering these four points is worth more than a verbal assurance, because it is the document you will look at if a later bill or notice does not match what you were told.