Insurance lapse: Discover what it could mean for you and your auto coverage

What is a car insurance lapse?

A lapse in car insurance is any time period—even as little as one day—in which you have a registered vehicle that’s not covered by car insurance. An insurance lapse can lead to increased coverage rates or reduce your chances of being accepted by some insurance carriers.

Missing payments resulting in a car insurance lapse is more common than you might think. It happens, and you’re not alone. We’re here to help you get back on the road quickly and legally, while also helping you understand and avoid penalties like having your license revoked or worse—jail time in states like Montana and Kentucky if you’re caught driving without insurance.

two girls sitting on top of a car

What to do if your car insurance lapses

If your car insurance lapses, the best course of action is to immediately contact your car insurance carrier and resolve the issue by restarting it. In most cases, if you act quickly, the matter can be resolved instantly and with minimal penalties for you and your record. 

However, make sure you don’t drive your vehicle until your coverage is restarted—the consequences of doing so can be severe.

 Get an auto insurance quote. Even if you’ve lapsed, we can help.

The consequences of an insurance lapse

  • Not having insurance coverage: The reason it’s important to resolve a lapse in coverage immediately is that, by definition, you aren’t covered by car insurance. Not being insured exposes you to numerous risks, and in states like Iowa, those risks can include:
    • Being personally liable for any damages you may cause while operating your vehicle during this time
    • Your license being revoked
    • Your car being seized
    • Fines
  • Rate increases: Once you restart your policy, your premium may be higher depending on how long you go without coverage. If you miss a payment by even one day, your insurer may charge a flat late fee due to the risk involved with a potential lapse in coverage following your grace period. Worse yet, if your insurance does lapse, you’ll likely be considered a high-risk driver and have a more expensive premium once your insurance is restarted.
  • Difficulty resuming coverage: After an insurance lapse, you might be considered a high-risk driver by your insurer, which could lead to you needing to reapply for a new, more expensive plan. Depending on the circumstances of your lapse in coverage, some insurers might even view you as too high of a risk and deny coverage to you altogether.
  • Impact on your driving record: In many states, such as California, auto insurance companies may be required to notify the Department of Motor Vehicles about your lapse in coverage, which could lead to it being noted on your driving record.

Avoid insurance lapses by making payments on time

There are several steps you can take to help avoid missing payments.

  • Set up automatic payments for your insurance premiums.
  • Routinely check to ensure the card and account information on your file is current to prevent any errors that might stop your autopayment from completing successfully.
  • Add a reminder on your calendar or phone before each due date if you don’t use autopay. This is a good way to help avoid late payments.

Car insurance lapse grace period

While auto insurers typically don’t offer an actual grace period, most have policies available that won’t cancel as soon as you miss a payment. These policies cancel after a period of time—often 10 to 15 days after a missed payment.

Many states have laws that protect drivers from having their insurance policies canceled without advance notice from the provider. In most cases, your insurance provider will notify you when you miss a payment and let you know if your coverage has already expired or if you have time to make a payment to avoid a lapse.

Whether or not your insurance does lapse, missing a payment will likely incur late fees, and you’ll still need to pay for the time that you’re insured after the missed payment.

The details of your insurer’s missed payment notification policy are in your contract. Reviewing those details can help ensure you won’t lapse.

Originally Published on Dairyland Blogs On November 22, 2021

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