Auto Insurance

What Happens If Your Car Insurance Lapses?

Your car insurance can lapse for several reasons, and it is critical to understand how to get coverage again. Driving without insurance can be financially devastating, so make sure you avoid the common causes of lapsing.

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There are many instances where your car insurance can lapse, whether you didn’t pay the bill or the insurance carrier canceled for a reason. Regardless, it is never a good idea to let your insurance cancel, but even more important to know what happens if your car insurance lapses.

What Happens If Car Insurance Lapses?

In almost every state, it is a requirement to carry auto insurance. So, if your car insurance lapses, a few things can happen. You will have to apply for a new policy, which means more underwriting and possibly higher rates. 

If your policy lapsed due to missed payments, you might find that you will have trouble obtaining another policy because the insurance companies look at you as a payment problem. And arguably, the worst thing that happens when your car insurance lapses is you are uninsured. 

Why Does Car Insurance Lapse?

  • Premiums– If you don’t pay your bill on time or at all, the car insurance policy will lapse.
  • Underwriting – Sometimes, the insurance company needs additional information about your policy, and if you don’t respond, they could cancel.
  • Driving History – The insurance company may cancel you if you have many accidents or violations.
  • Expiration – Your policy may have simply expired, and you did not renew it. 

What Will Happen if I Drive Without Insurance (With Lapsed Insurance)?

Letting your car insurance lapse is the last thing you want to do, especially if you plan to continue to drive. There are some severe penalties in a lot of states that result from driving an uninsured vehicle. They can include fines, loss of your license, and even jail time. 

The financial consequences can be devastating if you are in an accident and uninsured. Whether that is because you have to pay for the financial losses of the accident or future insurance, it is best not to let it lapse.

What Will Happen if I or My Uninsured Vehicle Is in a Traffic Crash?

When your car insurance lapses and you cause an accident, you will be responsible for paying for all the associated losses. For example, if you run a stop sign and hit a car and injure someone, you will have to pay to repair or replace their car, pay medical bills, and pay for repairs to your own car. You can see how quickly this can add up to tens, if not hundreds, of thousands of dollars. 

Rate Increases After a Lapse in Your Car Insurance 

Many insurance companies will now consider you a high-risk driver if you have a lapse on your record. When this happens, you may have a hard time obtaining a new policy, or you will pay higher rates. Some insurance companies can start you off with a 10% rate increase or more over what you previously paid. 

What Can Cause an Insurance Lapse?

The most common reason a car insurance policy lapses are late payments or other payment issues. Perhaps you forgot to pay your monthly premium. Maybe the bill didn’t come in the mail. If you have auto-pay set up but changed banks or lost your card and ordered a new one, the draft won’t be able to be pulled. 

Another popular reason car insurance lapses is because the insurance company cancels the policy for whatever reason, and maybe you forgot to get your new policy in time. Additionally, some policies need to be paid before they renew, so they simply could have expired.

Is There a Grace Period For Car Insurance?

For policies that have already started, if you miss a payment, your insurance company will send you a cancellation notice and let you know how long you have to make the payment, and usually, they give 10-15 days. We recommend having paperless billing, so you get these notices immediately, giving you more time than if they come in the regular mail. 

For renewal policies, you will typically only get one notice: the renewal invoice. This can be a popular time for a payment to be missed. Make sure you are on top of paying your renewal premiums to avoid a lapse in coverage. 

What Happens if You Miss a Car Insurance Payment by a Few Days? 

Generally, if you miss a payment by a few days, your policy may be able to be reinstated. This is a much easier process than obtaining a new policy because you will not need to start all over. However, this will vary for each insurance company; you may have to pay in full or sign up for autopay.

What To Do if You Have a Lapse in Car Insurance

The very first thing you should do when your auto insurance is canceled is to contact your current insurance company as soon as possible. Do not wait because the longer you have lapsed, the harder it will be to obtain insurance again.

You may be able to reinstate your policy if it has only lapsed for a couple of days, usually a week or less. If that is not the case, or you have lapsed for some time, it is probably best to shop around because, at that point, you will be considered a high-risk driver.

How Do I Avoid an Insurance Lapse?

You can do a few things to avoid a car insurance lapse.

  • Pay on time – Always pay your insurance premiums on time, and it is best to sign up for autopay, so you don’t have to remember. 
  • Regularly check your emails – Especially if you are on paperless billing. Your insurance company will communicate important things to you this way.
  • Pay with credit – If your checking account isn’t always full, pay with a credit card instead.
  • Pay in full – Avoid a lapse by paying your entire insurance premium upfront for the duration of the policy.
  • Shop around – You may not be getting the best rate, so if paying your premiums is difficult, get quotes elsewhere.