If you can’t afford car insurance, you may be wondering what happens if you don’t pay your car insurance. While you may be tempted to not make payment on your insurance bill, letting your coverage lapse can have many consequences, all of which will cost you far more than paying for your policy. For instance, one thing that happens if you have a lapse in insurance coverage is companies raise your rates. If you’re having trouble affording insurance now, missed payments won’t help so don’t stop paying your bill.
Furthermore, every state in the US has fiscal responsibility laws requiring drivers to pay for damages and injuries resulting from at-fault accidents, and only Wisconsin and New Hampshire do not require motorists to carry insurance at all. Because of this, staying insured and paying for your insurance on time is important.
Below, you’ll learn more about what happens when your car insurance is cancelled for non-payment as well as what you can do to make paying that bill easier. There may be ways you can get help with your car insurance payments.
What Happens If I Don’t Pay My Car Insurance?
There are two main reasons why you might not pay your auto insurance bill. The first, which is quite common, is simple forgetfulness. All too often, people simply forget to make their payments. On the other hand, people don’t pay their insurance because the premiums are too high for them to be able to afford. Even really cheap car insurance can still be difficult to afford if you’ve lost your job, have a huge medical bill, are going through a divorce, etc.
If any of these scenarios apply to you, it’s important to think about how missed or late payments can affect your future insurance rates, coverage options, and general financial security. Unfortunately, most insurance companies are not flexible when it comes to drivers paying their bills. If you are unable to pay your premium on time, your policy will likely be cancelled the same day and you will be uninsured.
Insurance Grace Period
Some auto insurance companies offer you what is known as a “grace period” that lasts anywhere from 5 to 10 days after your premiums are due. This short time-frame is designed to give you a bit of a cushion in the event of an emergency situation, such as a late paycheck, forgetting a payment deadline, or even a lost debit card.
Not all insurance providers offer a grace period so it’s critical to know whether or not your insurer offers this option. Even if you have a grace period, you may still be charged a late fee if you make your payment within that time.
Auto Insurance Cancellation
If you fail to make your payment within a specified period of time – and if you have allowed the grace period to lapse without paying – then there is a good chance that your insurer will cancel your policy. Your provider is required to send you a notification prior to this, whether by mail or email, and give you the exact time and date your insurance will lapse. Typically, if you pay your premium and any late fees or penalties before this time and date, you can avoid the lapse in coverage.
Consequences of Driving Without Insurance
Driving without insurance is illegal in 48 states, so if your auto insurance company cancels your policy and you take the risk of driving, you could find yourself in some legal trouble. If the police catch you driving without insurance, you could receive a significant fine at the very least; worse yet, you could have your car impounded and your driver’s license suspended or revoked for an extended period of time.
The absolute worst possibility involves being involved in an at-fault accident while you are not insured. If this happens and the other driver has uninsured motorists insurance, then that insurance will cover injuries and property damage.
Unfortunately, the other driver’s insurance company will likely take you to court and sue for reimbursement. Failure to adhere to the court’s orders to repay the carrier almost always results in a long-term suspension of your driver’s license and bankruptcy.
For this reason, if you can’t afford to pay for coverage or have your insurance cancelled, try your best to stay off the road and not drive.
Buying Car Insurance After A Lapse
Sometimes the consequences involved in failing to pay your insurance premiums are a little less obvious until it’s time to purchase a new policy. When you go any period of time without auto insurance, this is known in the industry as a “lapse”, and it reflects negatively on your coverage history.
When you attempt to purchase a new car insurance policy and the company checks your record, that lapse creates some risk for the company and is very likely to increase your premiums. You might also lose certain coverage discounts you were getting, driving your rates even higher. Studies have shown that the cost of car insurance after a lapse ends up being about 10% more.
Additionally, some states are very strict about requiring motorists to keep their registered vehicles insured. Depending on the length of your lapse, the insurance company may report your non-payment and lack of coverage to your state’s DMV. In fact, in many places, the system in place to communicate this information is electronic, and this notification is sent to the DMV automatically.
This means that you may not be able to register your car or renew your registration until you have purchased insurance. In some states, you may actually be forced to surrender your driver’s license, license plates, and registration until you can provide proof of insurance.
How To Avoid Having Your Car Insurance Cancelled For Non-Payment
There are some excellent tips to follow that can help you avoid car insurance lapses by making your premium payments on time. First and foremost, if you seem to forget to pay your premiums before the due date often, you can ask your provider to set you up on an auto-pay system. This allows the company to automatically pull the funds from your bank account or charge your credit card in an amount and on a schedule that you approve.
If you struggle to pay your premiums because they are difficult to afford, another option involves contacting your insurance company and trying to find ways to lower your rates. You might opt for a higher deductible or less coverage, or you might be able to find some new discounts that can reduce your premiums. Moreover, many of today’s best insurers have “safe driving” programs that can save you 30% when you use a mobile app or sensor in your car to track your driving habits.
Lastly, you may want to consider driving a different car that is cheaper to insure. Here’s a list of the least expensive cars to insure.
How To Get Lower Car Insurance Payments
Finally, if you need to lower your car insurance payments, you can always shop around. Companies are always trying to steal away customers, and another carrier might be willing to offer you a better price and policy. If you haven’t completed an insurance comparison this year, it may be a good time to compare quotes online and see the premiums and types of coverage other companies are offering. Even if you don’t plan on switching carriers, you can use a competing rate quote to negotiate with your current provider.
Ultimately, the only way to know that you have the cheapest car insurance is to research how much other insurers are charging. Just enter your zip code and we’ll provide a list of the top carriers in your area.