The Pitfalls of a Car Insurance Lapse
If you experience a car insurance lapse and aren't prepared, you could face high premiums and financial hardship in the event of an accident.
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A lapse in car insurance can occur for a number of reasons — not just the deliberate decision to opt out of coverage. Staying vigilant about your coverage can help you prevent these coverage gaps, but you should also know what to do in case of a lapse.
Whether intentional or not, a car insurance lapse could spell trouble for your wallet, leading to higher premiums in the future, potential penalties from the state, or hefty out-of-pocket expenses in the event of an accident. But depending on how quickly you act, these pitfalls could be preventable.
Common Causes of a Car Insurance Lapse
There's a wide variety of reasons why your car insurance may lapse, ranging from not paying your bill on time to factors out of your control. Even if you sell your vehicle and no longer need car insurance, future providers may still consider this to be a lapse.
Other common causes of a car insurance lapse include getting dropped by your current insurer or not renewing or reinstating your policy. An insurance provider may choose to cancel your policy themselves if they determine that you are too high a risk to insure or are unreliable on payments.
One scenario where a car insurance lapse may be risk free for policyholders concerns military deployment. If you're deployed, you may still be able to receive the benefits of continuous coverage on a new policy with the same company when you return, depending on your provider.
What Happens if Car Insurance Lapses?
Previous lapses in car insurance coverage could increase your premium, as car insurance companies consider this a sign that you are a higher risk to insure. If your car insurance lapses, your premium could go up and you may be at financial — and potentially legal — risk in the event of an accident. Without active coverage, the costs for vehicle damage, personal injuries, and even the injuries of the other driver or any passengers will likely be your responsibility to pay out of pocket.
Depending on your state's insurance laws, you could risk having your driver's license or car registration suspended, or even getting arrested for operating a vehicle without insurance. Some states require insurance companies to notify state authorities if your insurance has lapsed, so staying on top of your coverage is important to avoid any legal ramifications.
Understanding the Car Insurance Lapse Grace Period
Some car insurance providers will offer a short grace period for policyholders to remedy their car insurance lapses, although they may not have long. This grace period is typically in place to help policyholders who have simply missed a payment's due date by a few days.
The length of your policy's grace period will vary depending on your insurance provider. Typical grace periods can range anywhere from three days to up to 30 days, so check your policy to make sure you're aware of how long you have to recover if you're ever late on a payment.
What to Do in Case of a Car Insurance Lapse
If your car insurance coverage has lapsed, you may still have time to remedy the situation before you're negatively impacted. The first thing you should do is contact your auto insurance provider to find out what caused your coverage to lapse. If you missed a payment, you may still be within the grace period and have the opportunity to reinstate your policy.
In the case that your insurance provider will not reinstate your policy, you should then shop around to find a new policy so you have coverage. However, a lapse may make it harder to find an insurance company that's willing to offer you coverage and it could impact your rate options.
Benefits of Continuous Insurance Coverage
While not having car insurance could be met with ramifications, having continuous insurance coverage does often come with some benefits. Car insurance providers offer various types of discounts for drivers who have continuously held auto insurance. In fact, providers such as Progressive even offer discounts for those who consistently held insurance with a different provider before switching.
Staying up-to-date with your car insurance coverage also makes you a lower-risk driver to insure in the eyes of your provider, which could lead to lower overall insurance premiums.
Written by humans.
Edited by humans.
Elliot RiethElliot Rieth is a writer who was born and raised in Michigan, the center of the American automotive industry. With a background in the industry that spans from sales to digital marketing, Elliot has years of experience working directly with dealers and OEMs to create digital content and educate potential customers. When Elliot isn’t writing about horsepower or EVs, he can be found with his two greyhounds enjoying a new book or record.
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