What Happens If Your Car Insurance Lapses?
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Maybe you were a little short on cash last month. Maybe your car broke down. Maybe you just forgot. Either way, you didn’t pay your car insurance company on time causing your coverage to lapse. So what happens when your car insurance lapses?
It might seem like no big deal — there’s always a grace period, right? The truth is, a car insurance lapse is a big deal. Even a short lapse can result in:
- A rate increase
- Expensive force-placed insurance
- Repossession of your car
- A suspended license or costly fine
- Huge financial liability for any costs occurring during an at-fault accident.
But don’t panic! We’ll explain what you can do if your car insurance lapses, how to avoid extra charges and changes you can implement so it won’t happen again.
- When there is a lapse in your car insurance you may be granted a grace period. During this time, you’ll have an opportunity to pay your insurance before it’s canceled permanently.
- A lapse in car insurance can lead to higher insurance rates, suspension of your vehicle tags, revocation of your driver’s license, costly fines and fees, and jail time.
- If you’re involved in an accident after your insurance has lapsed, your insurance company may still cover your claim if you reinstate your insurance policy.
What is a Car Insurance Lapse?
A car insurance lapse occurs when you own a registered car that is left without active auto insurance for a period of time – even a day.
Car insurance lapses can happen if you:
- Paid your premium too late
- Have several missed payments
- Canceled your premium without a new one lined up
- Failed to renew your insurance policy
How Long Can Car Insurance Lapse?
That depends on your specific situation and where you live.
Insurers typically give you a brief grace period of three days, ten days or more to pay your late premium before canceling your policy. But that’s not universal!
In Virginia, for instance, an auto insurer may legally cancel your policy for non-payment if the payment is even one day late.
If you receive a notice saying you haven’t paid your premium, don’t put it off – contact your insurer right away, because they’ll have the answer. Even if you’re not able to immediately pay the bill in full, at least you can find out your car insurance lapse grace period and talk to the insurance rep about payment options.
If your car insurance lapsed because it was just too expensive, you can do something about it. Get a fresh start by comparing personalized car insurance quotes on Compare.com.
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My Car Insurance Lapsed and I Had an Accident!
Getting into a car accident when your insurance just lapsed is really bad luck — but it might be OK, depending on the circumstances. Let’s look at a few possible scenarios.
The Accident Wasn’t Your Fault
You got into an accident during an insurance lapse, but it wasn’t your fault. If police determine the other driver was 100% at fault in the accident, then their insurance should pay for any injuries you suffered and/or damage to your car. Your own insurance status shouldn’t matter. But take this as a sign that you need to reinstate your insurance, pronto!
You Started the Reinstatement Process
You caused an accident during an insurance lapse, but you’d already taken steps to reinstate your policy. This is a gray area. Let’s say the insurance company sent you a notice two days ago that your insurance lapsed. You promptly sent in your payment and requested reinstatement. But then, before the reinstatement went through, you got into an at-fault accident. What happens now?
Legally, your insurer may be able to deny any claims related to the accident, because your insurance lapsed. If you’ve been with your insurer for a while, and you have a track record of on-time payments and safe driving, they might cut you a break. If they don’t however, then you’re in the same boat as someone in this situation:
The Accident is Your Fault and You Haven’t Tried to Reinstate Insurance
You caused an accident after your insurance lapsed.
In this scenario, you’re probably out of luck. Because your policy lapsed, your insurance company is not obligated to cover any claims. This means you’ll have to pay out of pocket for any medical bills the other driver/passengers suffered, for any damage to their vehicle, and for any car repairs or medical bills you incur. This can be really expensive. The average auto liability claim for property damage is $3,638, and the average bodily injury liability claim is $15,270. That’s almost $20,000 in damages you could be responsible for paying.
You can always explain the situation to your auto insurer. Be honest: Say, “My car insurance lapsed, and I had an accident,” and ask if they can help. If your car insurance lapse was caused by circumstances beyond your control — bank fraud, a medical emergency, a military deployment — then your insurer might be willing to work with you.
The one thing you should never, ever do if you have an accident during a car insurance lapse is lie to your insurance company. If you fudge the date of an accident to make it look like you were insured at the time, your insurer is going to find out. Trust us: You don’t want to get charged with insurance fraud.
How Long Will a Lapse in Car Insurance Stay on My Record?
When your policy lapses, it will without a doubt negatively affect your driving record. The amount of time it stays on your record will vary based on your insurer.
Insurance companies will take into account how long your previous insurance lapsed and if your previous policy was canceled or you simply neglected to renew it. Generally, drivers who have lapsed car insurance on their record feel its effects for around six months.
How Can I Suspend My Car Insurance?
Some drivers choose to suspend their car insurance if they aren’t on the road for long periods. For example, you might be deployed in the army or move abroad for a few months.
Companies like GEICO will allow you to avoid a policy lapse by letting you simply suspend your insurance. To put your car insurance on hold, start by obtaining an “affidavit of non-use” from your state’s DMV. This document informs the state that you won’t be operating your vehicle for an extended amount of time.
Note: It might not be possible to suspend your car insurance if you have a car loan or lease. Check with your lender first since they might require you to maintain a minimum level of coverage even if it’s not in use.
Getting Insurance After a Lapse in Coverage
So, how hard is it to get insurance again after you’ve had a lapse in coverage? That depends on how long you let it go.
If it’s only lapsed for a week or two, you should contact your insurance company and request reinstatement. While you may have to pay an extra fee to have your policy reinstated, this is often the cheapest and simplest option.
Ask your insurer if they can erase the lapse when they reinstate your policy, which will help you get cheaper rates in the future.
If your car insurance lapse is longer — say, a few months or a year — then you’re better off starting from scratch. Use Compare.com’s quote comparison tool to look at quotes from several different auto insurers, then choose the most affordable option.
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Get your auto insurance quote
Just make sure you’re honest about your past insurance coverage and claims history when you’re going through the quote process because insurance companies will verify.
If you let your car insurance lapse and you have an outstanding car loan, then your lender may make you get force-placed insurance. This means the lender will purchase a policy for you and force you to pay for it. They do this because if you crash the car without insurance, the lender wants to make sure it gets paid for the outstanding loan balance. Force-placed insurance is expensive, and only covers your vehicle. You’ll have to purchase liability coverage separately.
Will My Car Insurance Rates Increase After A Lapse in Auto Insurance?
Even if your car insurance only lapses for a few days or weeks, most drivers will see an increase in their auto insurance rates after a coverage lapse. Whether you choose to reinstate your policy with the same insurance provider or seek out a new insurer, you’ll likely experience higher rates for around six months.
The sooner you reinstate your car insurance, the less you will see your rate increase.
How Can I Avoid A Lapse In Car Insurance?
The best way to avoid a lapse in car insurance is to be proactive. Here are a few things you can do to avoid a policy lapse and all the negative consequences that come along with it:
- Pay your car insurance policy on time: Failure to make car insurance payments on time is the most common reason for lapses in coverage. If you’re someone who struggles to remember your payment due date, consider signing up for your company’s auto payment option. Some insurance companies even offer a discount for enrolling in auto-pay, so explore this option if possible. If you know you won’t be able to pay your bill, call the company in advance and see if you can set up a payment plan.
- Sign up for paperless billing: Many of us spend our days on the go and forget to thumb through the mail when we get home. If you get other bills through email correspondence, paperless billing might be a better fit for you. You won’t miss a payment due to a forgotten envelope on the counter.
The moral of the story: Getting insurance after a lapse in coverage is challenging. If your insurance bill is too high, we have a solution! Find a better deal on Compare.com.
Car Insurance Lapse FAQ
Is there a car insurance lapse period?
Yes, there is a car insurance coverage lapse period. Most auto insurance companies will offer a grace period if you miss a payment. This grace period can last anywhere from 3 days to 30 days, but some states can cancel your policy if it’s even one day late. Check with your insurance provider to see what state laws apply where you live.
What should I do if my car insurance lapses?
If you’re still within the grace period of your policy lapse, you should pay your bill immediately to avoid a coverage lapse on your driving record. You may have to pay a fee to get your coverage reinstated. If the grace period is over, you’re now uninsured and do not have coverage.
Will my car insurance rates increase after a car insurance lapse?
Unfortunately, yes. Driving after your car insurance lapses is viewed as driving uninsured. You’re now considered a high-risk driver, and you’ll find that your insurance rates will increase the next time you shop for auto insurance.
What should I do if I no longer need car insurance?
If you won’t be driving for an extended period of time and won’t need car insurance, such as moving abroad, you can suspend your car insurance. You can do this by getting an affidavit from your local DMV that states you won’t use your vehicle during the time you suspend the insurance.
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