Basic liability car insurance is required in almost every U.S. state except New Hampshire and a lapse in car insurance can lead to fines, the suspension of your license or vehicle registration, impoundment of your vehicle, and even jail time in some cases. The reasoning behind making this kind of coverage mandatory is sound: if someone drives, they need to be financially accountable for their actions.
From the moment someone begins learning how to drive a car, they are expected to be insured without interruption. A car insurance lapse is unacceptable to insurance companies and law enforcement, and drivers who don’t buy auto coverage are putting themselves in harm’s way, physically and financially.
What Does A “Lapse in Car Insurance” Mean?
A lapse is defined as the “cessation of a privilege, right or policy due to time or inaction.” Basically, you no longer have car insurance coverage and are not covered by your last provider. If someone does not pay their monthly or bi-annual premiums on time, their coverage will lapse, regardless of how legitimate their reasons might be. Common reasons for lapsed auto insurance include:
- I forgot to pay my bill
- I’m broke and don’t have the money
- My car broke down and I’m not driving
- My only car was involved in an accident
- I sold my car
- I’m moving abroad or leaving the country for an extended period of time
Unfortunately, insurance companies won’t make exceptions for you if you don’t have the money to pay your bill or simply forgot to make a payment. You will eventually be classified as a “high risk” driver. The only exceptions to the rule are military employees in training or on deployment, newly licensed teen drivers, or drivers who have motorcycle insurance.
What Happens When You Don’t Have Coverage?
When faced with an economic crisis, unemployment, or temporary financial hardship, consumers tend to evaluate their bills by their perceived importance. Obviously utilities, food, housing and transportation are indispensable, but too many Americans view car insurance as something that can be cut. Most drivers think, “I’m a good driver. I’ll just be extra careful” and then let their car insurance lapse.
What most families don’t realize are the legal and economic consequences of this decision. Even if you don’t get pulled over for a ticket or have an accident, the lapse in car insurance is a matter of public record (companies are bound by law to report policy beginning and ending dates) and will be used to justify higher car insurance rates in the future, as is the case with “high risk” drivers.
Loss of Discounts
No car insurance is especially serious because once coverage is lost for even a day, your “Customer Loyalty” and “Safe Driver” discounts can be lost and your future premiums will increase. This doesn’t include the huge potential liability drivers face if they become involved in an at-fault accident.
Penalties For Having No Car Insurance
If the police or fire department shows up at the scene of a car accident, they will request proof of insurance from all parties involved. This will result in being cited for driving without insurance, and the minimum you can expect is a hefty fine. For example, the State of New York penalizes drivers $8 per day. After 30 days, the fine is $10 per day and after 60 days, the penalty is $12 per day. Suspension of driving privileges and even jail time is possible.
The Cost of A Car Accident
Aside from the immediate fine and suspension of their driver’s license, there are other consequences of allowing a car insurance lapse to occur. If you caused the accident, you will be responsible for paying any damages or repairs to the other vehicle, medical bills for injured passengers, litigation costs, as well as your own damaged property. Considering how expensive medical bills can be and the high cost of litigation these days, the out-of-pocket expenses can force some families into bankruptcy.
Forego Your Rights
Furthermore, many states will not allow you to seek reimbursement for lost wages, benefits, or accident-related medical treatment even if you did not cause the accident. Regardless of who is at-fault, you forego these rights when you choose to not have car insurance.
Auto Loans – Your Lender’s Rights
Finally, don’t forget your financial obligation to the bank or lender who financed your auto loan. If you are unable to find car insurance coverage during the grade period, the lien holder (bank) will either repossess your vehicle or buy a policy on your behalf and increase your monthly payments.
How To Avoid A Lapse In Car Insurance
One of the main reasons for a lapse in car insurance is irresponsibility on the part of the insured about when their premium payments are due. Insurance companies are required by law to announce any policy changes, including cancellations, ahead of time and in writing. This advance notice gives customers time to find alternate coverage when deciding to switch carriers. However, many people neglect their mail, thinking that the letter from the company is a bill or junk mail. Ignorance is no excuse if your provider has performed their obligation.
- Automatic Payments: Start by setting up automatic payments to avoid forgetting your due date.
- Plan Ahead: If you plan on switching carriers, time the start of your new policy with the end date of your old policy to avoid any lapse.
- Lower Coverage: Lower your liability insurance to your state’s minimum requirements to get cheaper rates. Eliminate unnecessary coverage such as collision, comprehensive or GAP insurance and raise your deductibles.
- Get Discounts: Actively seek discounts so that coverage is more affordable. If your car is damaged, not working, in the repair shop or you are driving very little these days, ask for a “Low Mileage” discount.
- Contact Your Carrier: Read all your mail and stay in contact with your company, working with agents to lower your premiums as much as possible. It is better to remain compliant with the law than to deal with the consequences later.
Avoiding A Gap In Car Insurance
Even those in severe financial straits need to adhere to the laws of the land. Auto insurance is important because it protects all parties involved, and allowing a lapse in car insurance coverage only sets the stage for larger financial and legal problems. The good news is that, with free car insurance quotes online, Americans can always find cheap rates.