There are all sorts of reasons that can lead to car insurance lapses. Perhaps you forgot to pay the bill. Maybe the insurance company canceled the policy due to tickets or accidents. The policy may have ended and you did not renew it. If the insurance company made an underwriting request and did not receive a response, cancelation can occur.
Whatever the cause, driving with lapsed insurance is never a good idea. If an accident occurs, all sorts of complications can ensue. In some jurisdictions, you could even face jail time.
As far as insurers are concerned, a car insurance lapse formally means there was no auto insurance coverage for 30 to 60 days. It also puts you in the high-risk driver pool, even if there are no other reasons for you to fall into that category. High-risk drivers will always pay more for insurance than those without that designation.
If you lease or finance rather than own your vehicle outright, a car insurance lapse could mean repossession of the auto. Lease and lending agreements usually stipulate that the lessee or borrower maintain full auto insurance on the vehicle. When coverage lapses, the terms of the agreement could be violated.
What To Do If Your Car Insurance Lapses
If your car insurance lapses, contact your insurance agency immediately. For best results, speak with a representative before your policy lapses. If you know you cannot pay the premium, insurance representatives may be able to assist you. Options such as discounts or raising your deductible may lower the premium sufficiently so that you can make the payment before letting your car insurance lapse.
You may also want to shop around and see if you can obtain suitable but less expensive insurance. Get at least three online quotes to make a valid comparison, and fill in the information honestly to receive an accurate quote. Note that not revealing your policy has lapsed will likely result in an incorrect quote.
After your car insurance lapses, expect to pay more for your new insurance. How much more? That depends on the length of the gap. If you renewed your insurance within a month, you might end up paying an additional 9 percent in premiums. If the lapse lasted up to 60 days, your rates may increase by as much as 48 percent. When the policy has lapsed for more than 60 days, it is likely your insurer will not renew it.
Many states impose their own fees when the insurance companies report a coverage lapse to the DMV. It is possible to incur a license or registration suspension for lapsed insurance. Such penalties run the gamut. For instance, a first lapse in Florida will cost approximately $150 license and registration reinstatement penalty. Across the country, California charges about $14 in reinstatement penalty. The reinstatement penalty is approximately $500 in Massachusetts and Nebraska. Many states raise the fees for longer lapses. Penalties are higher when insurance has lapsed more than once. A second lapse in Florida costs about $250, and a third one sets the motorist back roughly $500.
In some states, car insurance lapses trigger the need for an SR-22 filing if it causes revocation of your driver’s license or registration. Your car insurance company must certify with the DMV that you carry the minimum amount of coverage mandated by law. Generally, SR-22 filings are required for at least three years.
What happens if car insurance lapses because you are no longer driving? If you sell your car and decide not to replace it at this time, you may think allowing the insurance to lapse is no big deal. Note, however, that as long as the vehicle is still registered in your name, insurance might be necessary.
Car Insurance Suspension
If you know you are not going to use your car for an extended period of time, discuss your options with your insurance company. Maybe you are in the military and heading for deployment. Perhaps you are leaving the country for longer. Rather than cancel the policy, ask the insurance company to suspend your insurance for a specified period. Not all insurance carriers will suspend an auto insurance policy. Depending on where you live, you may need to obtain an affidavit from your state DMV.
Why a suspension rather than a cancellation or lapse? A suspension is not considered a lapse, and that will make a big difference in premiums when you need to purchase insurance again.
No matter the reason for a lapse, the driver is considered higher-risk by insurance companies. Even if you have a good driving record, a lapse will likely raise your rates. One way to avoid a lapse in coverage if you aren’t driving for a while is to ask a family member or friend to add you as a driver on their policy.
Car Insurance Lapse Grace Period
You should receive notice before an insurance company cancels your policy. The car insurance lapse grace period is not set in stone and varies by state. Much also depends on the insurance company. Some may offer a brief grace period. That is why it is important to find an insurer’s grace period policy when shopping for coverage. Grace periods generally range between 10 and 20 days to allow you to pay the bill and avoid cancellation.
If the lapse in the grace period is very short, say 24 hours, many insurance companies will reinstate the policy. That can also hold true if your driving record while on the policy was good. Once the policy is reinstated, the insurance coverage generally remains continuous.
If the policy lapses because the premium was unpaid, the insurance company will often reinstate the policy once funds are received. Expect to pay a fee if this happens.
My Car Insurance Lapsed and I Had an Accident
What happens when your insurance lapses and you have an accident? Much depends on where you live and who was at fault for the collision. If you live in a tort state, also known as a fault state, and were not at fault for the accident, you can contact the at-fault driver’s insurance company and file a claim. If you live in a no-fault state, where the driver’s insurance is responsible for covering their own injuries and any damage to the vehicle, you are not covered if your insurance has lapsed. You are also not covered in a fault state if you were the at-fault party.
If your car insurance lapsed and you reinstated it quickly–the accident happened in between the lapse and reinstatement–resist the temptation to file a false claim by stating the accident occurred after the reinstatement. Whenever an insurer sees a claim filed right after a reinstatement, it raises a red flag. In a worst-case scenario, you could face insurance fraud charges.
Should the question of fault not be clear, the insurance adjuster determines which driver is culpable. When a driver is insured, their insurance company will fight for them. With no insurance, you must fight on your own or obtain a lawyer.
If it is determined that you were at fault for the accident, and the other party was injured and the car damaged, you could be responsible for these bills. Besides the other person’s medical bills and car repair, the costs could include your own vehicle as well.
If unable to pay, you could face a personal injury lawsuit from those affected. There are all sorts of repercussions, including asset seizure and deductions from your wages to pay the expenses.
The General® and Car Insurance Lapses
At The General®, we know that car insurance lapses happen for many reasons, often because of circumstances beyond the driver’s control. If you had a lapse in car insurance and are seeking the most affordable rates, contact us for a free online quote. Compare our quote to other insurers, and you should see that The General® offers the best coverage meeting the needs of those with lapsed insurance. We can start your new coverage immediately. If you need help with an SR-22 filing, we can assist you in obtaining the proper documentation.
For nearly 60 years, we have helped drivers find affordable insurance coverage meeting their needs. Ride with The General®.
