It would typically be difficult for your friend to take out insurance on your vehicle since he does not have what is called "insurable interest" in it since he is neither on the loan or registration. You can discuss with your current insurance company the situation though and see if they will allow him to take out his own policy on the vehicle.

If your insurance company will not allow it one of our partners, Esurance, allows for people to purchase a policy even if they do not own the vehicle. They do not have this coverage available in every state so your friend would need to get a car insurance quote here to see if the insurance he needs is available.

If he is able to get his own policy, even without his name on the loan, title or registration, then you will still need to speak with your loan company and DMV to make sure that you also will not need to continue coverage on the vehicle. The loan company likely requires in your paperwork that you are named on the insurance policy on the car and the DMV normally will require you, as the one that registered the car, to continue coverage on it. The DMV and loan company may be able to tell you if there is a way for only your friend to carry auto insurance on it since you are gifting the car even though you are continuing to pay it off.