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What Happens If You Have a Lapse In Car Insurance?

What to Know

  • A lapse in car insurance is any period of time when your car is registered but it’s not covered with the minimum car insurance requirements.
  • Allowing your car insurance to lapse is dangerous, and can not only result in penalties from your insurer, but it can also lead to much more severe penalties like license suspension, fines, and even arrests
  • Missing an insurance payment or neglecting to renew are some of the most common reasons why drivers allow their car insurance coverage to lapse.

It’s simple: basic liability car insurance is required in almost every state. To have a lapse in car insurance can lead to fines, the suspension of your license or vehicle registration, impoundment of your vehicle, and in some cases, even jail time.

The reasoning behind making car insurance coverage mandatory is simple: if someone drives, they need to be financially accountable for their actions.

From the moment someone begins learning how to drive a car, he or she is expected to be insured without interruption. Not doing so is dangerous, and illegal.

For many, the reason behind a lapse in coverage is often financial. But if you’ve ever wondered what happens if you don’t pay your car insurance, just know this: it’s usually not a favorable or a safe outcome.

Bottom line? A car insurance lapse is unacceptable to insurance companies and law enforcement. Drivers who don’t buy car insurance coverage are putting themselves in harm’s way, physically and financially. Keep reading as we dig more into what lapsed car insurance looks like, and how you can avoid it.

Finding cheap car insurance rates is one of the easiest ways to avoid a lapse in your car insurance. Begin shopping for the best rates by entering your ZIP code into our free car insurance comparison tool.

What does it mean when your car insurance lapses?

What is a car insurance lapse meaning? A lapse in is defined as the “cessation of a privilege, right or policy due to time or inaction.” Therefore, the meaning behind a lapse in car insurance is simply this: your car insurance has run out, and you’re not covered. Remember this: 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 car 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 in the military and I’m on deployment
  • I’m a student away from home
  • 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. And we can’t state this enough: there are serious consequences to driving without car insurance.

According to the Insurance Information Institute (III), having a history of lapses for non-payment can lead to being classified as a “high-risk” driver. Once you’re classified as a high-risk driver, it becomes that much harder to get traditional car insurance. This means you may need to obtain high-risk car insurance, which is always much more expensive.

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 if you lapse on car insurance?

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. But when you consider what happens if car insurance lapses, there’s no doubt about it — you’ll think again before letting go of your coverage.

The Cost of Car Insurance After a Lapse

Having an active car insurance policy isn’t just a matter of personal safety responsibility, it’s also an important matter in terms of the law and your car insurance coverage. First, let’s take a closer look at what a lapse in car insurance could mean for your bottom line.

Earlier in this piece, we named some of the reasons why you may have experienced a lapse in car insurance. Whether you missed a payment, forgot to renew, or you’re now living overseas, it will be imperative that you contact your insurer right away once you realized your coverage is no longer in place.

Immediately, you’ll probably be asking yourself these questions:

Will the cost of my car insurance go up after a lapse in insurance? How long can you go without car insurance before being penalized? The answer is that it all depends on the insurer.

Here’s the deal: if you catch your lapse in coverage early — let’s say, by a day or two — your insurer may show mercy and allow you to reinstate your coverage with a small fee if it is only a 1-day lapse in car insurance. In fact, some insurers have a defined car insurance lapse grace period in which they will forgive the error, but that usually comes at a price.

But keep this in mind: the longer you are without coverage, the less likely your insurer may be to extend mercy. If they decide to keep you as a customer, you may be forced to begin a new policy at a much higher rate as a result of the lapse in coverage, making it harder to find the cheapest auto insurance for a lapse in coverage.

Lapse of Car Insurance on Public Records

As long as you have a lapse in car insurance coverage, and your policy is no longer in effect, your insurance provider may notify your DMV. This is because companies are bound by law to report policy beginning and ending dates. If your insurer reports this lapse in car insurance to the state, a number of things can take place.

First thing’s first:

The state you are living in may impose a stiff penalty or fine for not having insurance coverage. Depending on where you live, this could immediately cost hundreds of dollars. But there’s more: you may also have your license or registration (or both) suspended.

Secondly, once it becomes public record that you have a lapse in car insurance, other car insurance companies will have access to that information. That means if you’re forced to find coverage with another provider, and they run your background, your lapse in coverage will be a red flag.

As we mentioned earlier, seeing that red flag will be enough reason for insurers to want to classify you as a high-risk driver. High-risk drivers are not only known to pay much higher rates, but they also tend to have a harder time obtaining coverage.

How long does an insurance lapse stay on your record?

How long a lapse in car insurance remains on your record largely depends on your insurer, and where you live. But generally speaking, many violations – including a lapse in car insurance – can remain on your record for about three to five years. It’s all the more reason to be vigilant in ensuring you don’t have gaps in your coverage.

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Having a Car Accident During a Lapse in Car Insurance

Consider this scenario: 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.

As if getting a hefty fine weren’t enough, that’s only just the beginning.

What is 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.

If you think the idea of having to shoulder those costs on your own sounds intimidating, listen to this:

The Insurance Information Institute reports that the average auto liability claim for bodily injury is  $16,640.

Without a doubt, having to foot a $16,000+ bill is no easy task, and is certainly not worth the risk of allowing your car insurance coverage to lapse. 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.

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.

Losing Your Car After a Lapse in Car Insurance

Finally, don’t forget your financial obligation to the bank or lender who financed your auto loan. Here’s what you need to keep in mind: if you are financing a car, or leasing a car, having car insurance is often a requirement.

If you are unable to find car insurance coverage during the grace period, the lien holder (bank) may either repossess your vehicle or buy a policy on your behalf and increase your monthly payments.

Sounds risky, right? We thought so. All the more reason to do all that you can to prevent ever having a lapse in your car insurance. Keep reading as we explore some fool-proof ways to maintain continuous car insurance coverage.

What to do if You Have a Lapse in Car Insurance

What should I do if I have a lapse in coverage? If you experience a lapse in coverage, the very first thing you should do is avoid driving altogether. Remember: driving without insurance is dangerous, illegal, and can lead to extremely serious consequences. The risk isn’t worth it. If you’re not insured, seek help in securing transportation until you’re covered.

Once you realize you have a lapse in coverage, you need to act quickly. Get in contact with your car insurance company to see if and how the situation can be rectified. As we mentioned earlier, it could be as simple as paying a reinstatement fee.

You may find yourself in a situation where you have to get a brand new policy with a different provider. If that’s the case, shop around and see who can offer the best rates.

How To Avoid A Lapse In Car Insurance

One of the main reasons for a lapse in your coverage, whether it’s car or motorcycle 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.

The good news?  A lapse in car insurance coverage is 100% avoidable. Here are a few simple tips to help you stay on top of your car insurance game

  • Automatic Payments: Start by setting up automatic payments to avoid forgetting your due date. Many car insurance companies will even go as far as offering discounts for enrolling in automatic payment programs.
  • 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 lapses or gaps in coverage.
  • Lower Your Coverage Levels: If high payments are an issue, consider lowering 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 car insurance 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.

We can’t say it enough: car insurance is important because it protects all parties involved. 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, you can always find cheap rates. Protect yourself from lapsing in coverage, and begin the process of seeking the best and lowest premiums today. Just enter your ZIP code into our free car insurance comparison tool.