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Can You Reinstate a Canceled Auto Insurance Policy?

Yes, in some cases, you can reinstate insurance after it’s canceled or lapsed. However, your options depend on the reason for cancellation. If you miss a payment and exceed the grace period, you can likely call the insurance company and reinstate the policy fairly easily. On the other hand, if your license was suspended due to a DUI, your previous insurer may cancel your policy without an option to renew.

No matter the situation, you should contact your insurer as soon as possible to understand your options, since driving without coverage can lead to severe legal and financial repercussions. This article explores why insurers cancel policies and your options in each scenario.

How Do Car Insurance Lapses Work?

A lapse in coverage occurs when your policy ends, whether by your choice or your insurer’s, and you do not have a new policy in place. In many cases, you can avoid an insurance lapse. If you miss an insurance payment, your insurer will notify you and allow a 10-20 day grace period to pay your premium. Your policy may be canceled after that period, causing an insurance lapse.

Why Does Insurance Lapse?

Insurers may choose not to renew your policy once it ends, but you will receive a notice beforehand and have time to shop for new coverage. Non-renewal indicates that your insurer considers you to be higher risk. For example, if you file too many claims, your insurance provider might not renew. Non-renewal differs from cancellation, though. An insurer can cancel your policy mid-term for a variety of reasons, such as:

  • Getting a DUI
  • Revoked or suspended license 
  • Missed payments 
  • Fraudulent claims or application information 

Your insurance can also lapse if you do not auto-renew your policy at the end of a term.

What Are The Consequences of Lapsed Insurance?

Whether caused by non-renewal, cancellation, or your term ending, an insurance lapse can lead to legal and financial issues. Possible concerns include:

  • If you drive without coverage and cause an accident, you must pay for damages out-of-pocket.
  • Insurers charge higher premiums to customers with lapsed insurance.
  • Your previous insurer may send debts to a collections agency, negatively affecting your credit score
  • Lapsed coverage may void your car registration or incur extra DMV fees.
  • A loaned or leased car may be repossessed due to lack of insurance. 

Avoid these potential dilemmas by responding immediately to any notices from your insurer. Work quickly to reinstate your policy or purchase one from another auto insurance company.

Are There Any Locations Where You Do Not Need Insurance?

Each state enacts its own laws regarding minimum coverage. Two states, New Hampshire and Virginia, do not require drivers to carry auto insurance. Virginia residents can pay the DMV a $500 fee to drive without insurance. However, both states require at-fault drivers to pay for property damages and bodily injuries in case of an accident.

How To Reinstate Car Insurance

Your insurance reinstatement options depend on why your policy lapsed. In all situations, you should gather relevant information before proceeding, such as your previous policy number, driver information, license plate number, and VIN.

If You Missed Payments

Your insurance company will not cancel your policy immediately if you miss one payment. They must provide notice via email or letter to inform you of the grace period. If you cannot avoid a lapse in coverage, follow these steps to reinstate your policy. 

  1. Contact your insurer. Ask whether they can reinstate your policy.
  2. Pay your missing costs. If you pay any missing premiums and penalties promptly, the insurer might renew your policy rather than cancel.
  3. Sign a no loss statement. If asked, you can sign a no loss statement that confirms you have not had any losses between the cancellation and reinstatement date.
  4. Compare alternative options. If they do not reinstate your policy, shop around for a new one.

If Your Policy Term Has Ended

You can avoid a lapse in coverage by renewing or purchasing a new plan before your previous term ends. Pay attention to notices from your insurer, and enroll in autopay if possible. Otherwise, if you experience a gap in coverage, complete these steps. 

  1. Contact your insurer. Ask whether they can reinstate your policy. Since the lapse was not from missing payments, chances are likely they will renew your policy.
  2. Pay your costs. You will be expected to pay your first premium or purchase a new policy. Act quickly to avoid a long lapse in coverage, which can increase your rates.
  3. Enroll in auto-renew. Opt into automatic payments to avoid cancellation, and you may even get a discount. 

If You Provided Fraudulent Information

In this scenario, your options for reinstatement are limited. Insurers commonly enforce no-tolerance policies for fraudulent information or claims, depending on the severity. Examples of fraud include omitting information on your application, using a false address, submitting multiple claims for one incident, and falsifying claims to receive a higher payout. You can attempt to reinstate your policy as outlined below. 

  1. Contact your insurance company. If you believe the company made a mistake, give evidence to back up your claim. If you provided incorrect information, send corrected documentation.
  2. Repay rates or penalties. You must pay the difference to reinstate your coverage if you omitted information to get a less expensive policy. 
  3. Ask about a waiting period. If your policy is canceled, ask about a waiting period to reinstate or reapply. However, the company may still refuse to insure you.
  4. Shop for a new policy. Your premium may increase, but avoid more severe consequences by telling the truth on your application. 

If Your License Was Suspended

Depending on the severity of your suspension, an insurance company may allow you to keep your policy. If you still possess your vehicle, it’s worth maintaining coverage if possible. Insurance protects you from non-driving incidents, such as theft. However, if your insurer has already canceled your policy, you may be able to reinstate it.

  1. Understand the terms of your suspension. Suspension and revocation come with different requirements for reinstatement. You may still qualify for a restricted license.
  2. Determine whether you need to file an SR-22. Some suspended drivers must prove they have adequate insurance before the state reinstates their license. Not every insurer offers SR-22 filings, so this limits options. 
  3. Contact your insurance company. Find out the terms to reinstate your policy and whether they enforce a waiting period.
  4. Complete training requirements. For example, your insurer may need proof that you took a driving class. 
  5. Purchase a new policy. You typically need to provide proof of insurance to get your license back.

Does Lapsed Insurance Cause Auto Insurance Rate Increases?

Yes, a lapse in coverage can increase your premium rate and complicate the process of getting a new policy. Insurance companies determine your rate based on a combination of factors, including your age, demographic information, location, driving history, and vehicle. Lapsed insurance signals that you may be a high-risk driver, which leads to a higher premium. Your premium may increase by 10-30% depending on the length of lapse. 

It may be tempting to omit a lapse when applying a new policy, but be as honest as possible. Insurance companies report lapsed coverage to the DMV, which stays on your record for several years. Prospective insurers will find out when evaluating your application, and you risk even higher premiums or policy cancellation.

What Can You Do If You Cannot Reinstate Your Policy

Even if you follow all the right steps to reinstate your policy, your previous insurer can still deny coverage based on perceived risk. More serious infractions, such as a fraudulent claim, may cause the company to drop you as a customer. If you cannot reinstate your original policy, do not panic. You can most likely get coverage from another company, but it may be more expensive. Start by using these strategies. 

  • Compare rates at different insurance companies. Be upfront on your application. 
  • Look into non-standard insurers. Some insurers will cover high-risk drivers. These may cost more or have limitations. 
  • Research minimum coverage insurance. If standard insurance is too costly, look for less expensive options. 

All in All

Avoiding gaps in coverage means you can keep driving safely. However, if a lapse in coverage occurs for any reason, stay off the road until you purchase a new policy. Driving without insurance is illegal and can lead to penalties, license suspension, and even jail time in some states. 

Once you reinstate your policy or buy a new one, take action to avoid future lapses. Enroll in automatic payments, drive cautiously, and stay in contact with your insurer to resolve any issues quickly. Eventually, lapsed coverage or driving infractions will fall off your record, and your rate will decrease. 

Frequently Asked Questions

Insurance companies typically give 10-20 days’ notice before canceling a policy. Depending on the reason, you may be able to avoid cancellation in the first place; for example, you could work out a payment plan. If you forgot to renew or missed one payment, the reinstatement process should be fairly quick. However, if you need to attend traffic school or undergo a waiting period due to fraudulent information, that can extend your timeline. 

Each state has its own requirements for minimum coverage, cancellation grace periods, valid reasons for cancellation, and reinstatement. Research your state’s laws to understand possible fines and expectations. In many cases, you must provide proof of insurance or risk having your registration revoked. Some states, such as New York, charge an insurance lapse penalty.

Find an auto insurance policy that meets your needs.

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Find an auto insurance policy that meets your needs.

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