What Happens if Your Insurance Lapses?

by Bianca Garrison - November 19, 2019
Worried man looking at a document in front of a laptop

You may be super busy and forgot to pay your car insurance premium despite all the reminders and notices from your insurance company. Or you have a vehicle parked in the garage or driveway that you never drive, so you don’t have it insured anymore. Whatever the reason may be, you should always avoid a car insurance lapse as it raises red flags with insurance companies. Read on to learn why. 

What Happens If Car Insurance Lapses

If your car insurance lapses, the first thing you want to do is call your insurance company and request reinstatement. If you were in good standing with your insurance company before the lapse, there is a good chance they will reinstate you. If not, you can also ask a friend or family member if you can be added to their policy. Being listed as a driver on a family member or friend’s policy is an excellent option if you don’t have a vehicle. 

How to Avoid a Lapse

You may have legitimate reasons for not paying your car insurance, but the consequences for not paying can be severe. Driving with lapsed insurance is against the law, and insurance companies may increase your premiums when they reinstate you because it is implied that you are driving with no car insurance coverage. Here are a few simple ways to avoid a car insurance lapse:

  • Put payment date reminders in the calendar on your phone
  • Borrow money from a family member or friend if you can’t afford it
  • Reduce your coverage
  • Use a credit card
  • Shop around for lower rates
  • Communicate with your insurance company. You may be able to get a late fee waived

Most companies have an insurance lapse grace period that allows you to make a payment after your due date without being penalized. For some companies, it can be up to 30 days. You will need to check with your insurance agent to find out what yours is. But please note that paying during your grace period over and over could reduce your chance of being reinstated. 

There is no car insurance lapse fee, but your rates may go up after your car insurance lapses, and you may be considered high-risk. In that case, you will need high-risk car insurance. 

Penalty for Lapse in Car Insurance

If you are in an accident even one day after your grace period, you won’t have any coverage. Some states also charge a daily fine if you are caught without car insurance. It may also be difficult for you to get car insurance coverage after you allow your policy to lapse. Some insurance companies won’t even take customers who can’t show six months of prior coverage. 

In addition to that, you will be labeled as a high-risk and will have to get high-risk car insurance. High-risk car insurance typically costs more than standard car insurance and is offered to drivers who are considered to be a liability for insurance companies.

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