What Happens if My Car Insurance Lapses?
Mistakes happen and so do lapses in car insurance policies. Just what is a lapse in insurance? A lapse in car insurance occurs any time you have a car registered in your name but you do not have car insurance coverage. How did this happen? Your policy may have run out or it was canceled because you missed payments.
Having a lapse in car insurance is a pretty serious situation since auto insurance is necessary for driving a car in the United States. A lapse in car insurance may also cause an insurer to spike your insurance rates.
What Is a Lapse in Coverage?
A lapse in coverage occurs when you don't have car insurance on a registered car you own. It can be as short as a day or longer than a few months.
Some carriers won't punish you if you have a short coverage lapse (under two weeks or less), because there may be justifiable reasons your coverage lapsed. It could have occurred because your payment arrived late or you no longer own a vehicle.
Is Driving without Insurance Illegal?
Many states require drivers to carry auto liability insurance coverage on their cars. It includes:
- Bodily Injury Liability - This coverage pays for another person's medical expenses when a policyholder is at fault in an accident.
- Property Damage Liability - It pays for another person's property and auto damages when a policyholder is at fault in an accident.
Drivers who own cars and have a lapse in coverage may be violating the law in their state. These include cars that aren't being driven or those that are parked in a driveway.
What Happens if Car Insurance Lapses?
Don't drive your vehicle if your insurance lapses or you're uninsured. Each state has different penalties for people who drive while uninsured. Some states will suspend your driver's license if you drive uninsured. Others will impound your vehicle.
If your auto policy should lapse your auto insurance company is not obligated to cover any auto claims. It means you will have to pay out of your own pockets for accidents or damage to you, your car and others and other property. This includes medical bills for yourself and the other driver, damage to the other vehicle and any repairs for your own car.
Other risks you'll face are license suspension and jail time. Some states will put you in jail if you have a car accident while uninsured. You're taking a big risk since it's dangerous and illegal.
When you reinstate your policy, your car insurance rates may increase.
How Long Can Your Car Insurance Lapse?
A lapse in coverage could end up in cancelation, depending on how fast your auto insurance company moves to cancel the policy altogether.
After that, your lapse in insurance will continue until you apply for, are approved and pay for a new policy. Some auto insurance companies may require the driver to pay a reinstatement fee.
What Is a Car Insurance Lapse Grace Period?
Some auto insurance companies offer grace periods of three days and other companies give you up to 30 days to get current on your car insurance payments.
In addition, an auto insurance company may offer a short grace period with no late fee or a long grace period but with a late fee attached.
Review the details of your policy carefully. And reach out as soon as possible when you become late on your auto insurance payment. Getting your policy current during the grace period is ideal.
Compare quotes and get affordable rates on your next policy.
What Happens with an Insurance Lapse on a Financed Car?
If your auto insurance policy lapses on a financed car, the lienholder could repossess the car or purchase a new insurance policy for the car at higher rates.
How can this be? If you drop auto insurance from a financed car it is a violation of your finance contract and it may put your car loan in jeopardy. Check the specifics of your auto loan before allowing your car insurance to lapse. Do everything you can to get your car insurance current again as soon as possible.
Will I Get Penalized for Driving without Insurance Coverage?
First, do not drive your vehicle if your insurance lapses or you're uninsured. Each state has different penalties for people who drive while uninsured. Some states will suspend your driver's license if you drive uninsured. Others will impound your vehicle.
Another risk you'll face is jail time. Some states will put you in jail if you have an auto accident while uninsured. You're taking a big risk since it's dangerous and illegal for a driver to operate a vehicle with a coverage lapse.
What Happens with a One-day Lapse in Car Insurance?
Even just a one-day lapse in your auto insurance can result in a higher insurance rate. The cost of getting a new policy is usually more expensive than staying with one, continuous policy. So get your car insurance current as soon as you can. And do your best to pay on time with your payments going forward.
Getting Car Insurance After a Lapse in Coverage
After a policy lapse in car insurance coverage, you likely will pay a higher rate on a new insurance policy for your car. And you will want to shop around for the most affordable car insurance premium you can find from a reputable insurance provider.
But start if you can with your current car insurance company. Is there a way for you to catch up on your payments, especially if you are just a few days behind or in the policy's grace period? Getting your car current with your current auto insurance company is the best resolution to a lapsed policy. You don't have to pay too much for solid coverage. Just compare what rates are available to you by entering your zip code at the bottom of the page.
What Is a Car Insurance Lapse Fine?
Once your auto insurance policy is no longer in effect, your auto insurance company will notify the DMV and alert them that your car is uninsured. Depending on where you live, being uninsured with your car can lead to car insurance lapse fees, fines and penalties. Whatever the fees, fines or penalties in your state, you will want to pay them as soon as possible.
What Is an Insurance-Lapsed Car Accident?
This is the worst-case scenario while driving with lapsed car insurance: having an accident and having the accident be your fault.
You will need to pay for damages to your car and the other driver's vehicle. You will also need to pay for any damage to the property and you will need to pay medical bills for yourself and the other driver. The costs of this accident would be a nightmare scenario for most drivers to pay out-of-pocket, yet another reason to get a lapsed insurance policy paid up as soon as you can.
Getting Car Insurance After a Lapse
After a lapse in car insurance, you can reach out to your current company and ask to be reinstated, if you have the money that you owe the company. You may or may not be able to reinstate your policy.
Or you can shop around for new auto insurance on your own. Be aware that you will be paying more for auto insurance now that you have a lapsed policy on your record, but you may find a company that will charge you less than others.
The more you shop around the better your chances of landing a better deal. You can use SmartFinancial to find better coverage in your area. Just enter your zip code on this page, and we'll find you the right insurance policy and local agent.
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