How a Car Insurance Lapse Affects Premiums

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Written by Ray Prince Edited by Nick Versaw

Updated June 15th, 2023

Forgot to renew your car insurance? Moved states but never got a new policy? Your car insurance might have lapsed. A lapse may result in severe consequences, like a registration or license suspension, fines, reinstatement fees, and higher insurance costs.

This guide will answer all your questions about car insurance lapses, including common reasons they happen, how a lapse affects insurance rates, and how to avoid a gap in your coverage.

If your premiums have recently spiked due to an insurance lapse, now may be a great time to compare rates from top-rated car insurance companies like GEICO, Nationwide, and Progressive.

What Can Cause Insurance Lapses?

Insurance lapses happen when you fail to renew your car insurance coverage, even if it’s only a one-day gap.

Three main reasons for insurance lapses are:

• Missed payments
• Cancellation by the insurer
• Non-renewal of your policy

Insurance lapses due to insurer cancellations are usually because policyholders don’t abide by policy terms and conditions, like excessive claims, failing to pay, numerous traffic violations, or purposely lying about your driving record on your application. 

A non-policy renewal could happen due to changes in policies by the auto insurance company. For example, they might no longer operate in your state, or maybe they’ve phased out specific coverages.

Regardless of the reason for an insurance lapse, we highly recommend addressing it immediately. Even a single day of lapsed coverage can force insurance companies to report it to your state’s Department of Motor Vehicles, which can result in a suspended driver’s license and registration, fines, and administrative fees.

How Does a Car Insurance Lapse Affect Rates?

So, will your rate change if you let your insurance lapse? Let’s look at what the data says. Here are the average monthly premiums paid by real drivers with proof of prior insurance and no proof of prior insurance:

It’s not guaranteed that your rates will look like this, but they could increase in a similar pattern. Premium increases are subject to change based on the insurer, time of lapsed coverage, driving record, and applicable state laws.

Outside of Rising Premiums, Should I Expect Insurance Lapse Fees?

In short, yes. Every state’s Department of Motor Vehicles has provisions regarding fees for insurance lapses.

For example, Alabama’s DMV charges a $200 fine for your first suspension and $400 for the second and subsequent suspensions. Colorado charges a reinstatement fee of $95, and Connecticut charges a reinstatement fee of $175.

Other states, like Delaware, have a slightly more complex fee structure, starting with a $50 fee to reinstate a suspended license and a $200 fee to reinstate a revoked license. In the worst of cases, you may even see jail time. For example, Montana issues a penalty between $250 and $500 and up to 10 days in jail for first-time offenders.

Note these fines are not inclusive of criminal, court, legal, or other fees unrelated to insurance lapses.

We encourage you to visit your state’s Department of Motor Vehicles website to learn the penalties for insurance lapses.

Do I Get Penalized Even if My Car Insurance Lapse is for a Few Days?

If you miss an auto insurance payment by a few days, expect either an immediate lapse in auto insurance coverage or a short grace period to pay the outstanding balance before policy cancellation. Depending on your state’s laws and the insurance company, either option is possible. Pay immediately to avoid any further action.

Every state’s Department of Motor Vehicles has a unique reinstatement fee structure for lapses in coverage. If you miss the grace period, check with the DMV and your insurance immediately to start your coverage again.

How Long Does a Car Insurance Lapse Stay on Your Record?

The time a coverage lapse stays on your record depends on several factors, such as your state, insurance company underwriting criteria, forgiveness programs, and driving history.

For example, the California DMV marks an insurance lapse on your record for up to 3 years. Montana drivers have their lapse on their record for up to 5 years.

How Can I Avoid Insurance Lapses?

Fortunately, there are several ways you can avoid auto insurance lapses. The number one way is to pay your premium on time, every time. Enroll in automatic payments to automatically withdraw funds from your bank account on the payment due date. Sign up for paperless billing to check your account’s billing status online without waiting for anything in the mail.

If you purchase a new auto insurance policy from a different provider, ensure its effective date is the day before your old policy‘s cancellation date. 

If you anticipate not driving for multiple months or more, suspend your coverage instead of canceling your car insurance policy. You can put your insurance on hold if you get an “affidavit of non-use” from the DMV. This document informs the state that you won’t operate your car for an extended time. 

For students who are away at school while their vehicle is at home, don’t let their insurance lapse. They must still be listed on the policy if they remain the vehicle’s registered owner. You might be able to get a student away at school discount if they’re under 25 and go to school more than 100 miles away without their car. Every auto insurance company has different options and requirements to consider.

What Other Factors Can Affect My Rates?

Insurance lapses aren’t all that goes into deciding the price of your premium. Other rate factors include your age, your gender, the vehicle model/age, your address, and the coverage limits you choose. We’ll get into a few of these.

Age

Generally, younger drivers pay higher car insurance premiums than older drivers, thanks to an overall lack of driving experience and a higher likelihood of participating in risky driving behavior like speeding. You can expect rates to remain steady in your 20s, 30s, and 40s (assuming a clean driving record) before an eventual uptick in your 50s and 60s.

Vehicle Type

Luxury and performance drivers will have a higher cost of parts and labor, high depreciation rates, and potentially a car accident-prone body style. Nice cars also have a higher likelihood of theft or damage. Owners of these cars usually pay higher premiums because of this.

Address

Where you live can lower or raise your insurance rate. Drivers living in densely populated urban areas with a higher ratio of uninsured or underinsured motorists and higher claims volume are more likely to pay higher premiums. Drivers in rural areas tend to see lower rates. Your state comes into play, too.

Here’s just one example of the discrepancy in insurance costs between states. According to data collected by Quadrant Information Services, these are the average monthly premiums paid for liability-only coverage in Florida, Iowa, and Maine:

Florida residents pay more than three times what Iowa residents pay, on average, just for living in Florida. There are several reasons behind this, but one of the primary drivers of these higher rates is Florida’s somewhat unique car insurance rules and regulations. Every state has its own minimum insurance requirements and other rules and regulations around insurance, which leads to wildly different rates from state to state.

Coverage Limits

Policies with low deductibles and/or high liability limits pass more risk to the insurer, resulting in less out-of-pocket costs. As a result, premiums will be higher.

Time to Recover After a Car Insurance Lapse

Now that you know how car insurance lapses affect rates, use Compare.com’s rate comparison tool to shop for affordable auto insurance. You can quickly gather quotes from some of the best car insurance providers like Liberty Mutual, Allstate, and Travelers:

Methodology: All of the data referenced in this article has been gathered in collaboration with Quadrant Information Services. We analyzed more than 2.5 million rows of carrier-reported data to calculate the average rates referenced above. All rates are based on an insurance profile of a single-vehicle policy for a driver that owns a Honda Accord. For more information on how we calculate rates, please reference our data methodology.

Ray Prince Insurance Writer

Ray Prince is an auto insurance writer for Compare.com based in Miami. He specializes in writing long-form content and product descriptions for the automotive and auto insurance industries. His work appears on sites such as Freeway Insurance, Auto Guide, Turn5, Mercedes Benz U.S.A., and Pelican Parts, with past and current roles as a digital operations manager at Pandora Media and iHeartMedia.