What Is a Lapse in Car Insurance Coverage?

A lapse in coverage can lead to more expensive rates when you buy insurance again. Learn more about it here.
Distressed man in car with hand on face

Lapses occur when you go through a period without car insurance, despite still owning a registered vehicle or having a driver’s license. If you have a break in coverage like this, insurers may think of you as a high-risk driver, leading to expensive auto rates. Depending on your state’s laws, you may also face a driver’s license suspension or receive a hefty fine.

In this article, you’ll learn more about what it means to lapse on auto insurance. This includes how it happens, how it affects your rates, as well as other important consequences. More importantly, we’ll also offer advice on what to do if you’ve lapsed on your coverage.

How a Lapse in Coverage Happens

Lapsing on your auto insurance is serious. However, it can happen easily. Here are three common ways people experience lapses in coverage:

Forgetting to Pay Your Premium

The most typical way to lapse on your insurance is by forgetting to pay your bill. It can be easy to misplace your monthly bill or simply have it slip your mind. Unfortunately, even if you forgot for a little while, it’s still an interruption in your coverage. This puts you at risk of higher premiums and fines from your state’s Department of Motor Vehicles (DMV).

If you forgot to pay your premium, try to pay it as soon as you remember. Your provider may have a contractual grace period if you only missed your payment by a few days. We’ll explain more about that later in this article.

A good way to stop yourself from forgetting to pay for your insurance is to set up automatic payments. This ensures that you’ll always pay your bill on time and have continuous coverage. Depending on your insurer, paying automatically can also get you an easy discount on your rates.

Cutting Coverage to Save Money

Imagine that you never have to go anywhere but have a car sitting in the garage. You may think, “why would I spend money insuring a vehicle I don’t drive?” It may seem like a good idea to cut your auto insurance to save a couple of bucks each month, but this will lead to a lapse in coverage.

Once you try to get another policy, insurers will see a gap in your history and may give you expensive rates. Many states also require insurance before you can register a vehicle. Your provider could alert your state that you no longer have coverage. This can lead to you losing your registration, facing a fine or points on your driving record, or even having your car impounded.

Your Insurer Canceled or Didn’t Renew Your Policy

Insurers can cancel or decide not to renew your policy with them for various reasons. One of the most common reasons, however, is that you’ve received a violation for something severe such as a DUI or reckless driving.

Unfortunately, whatever caused your previous provider to drop you might scare off other companies. This can make it hard to get auto coverage and could potentially cause a lapse.

How Coverage Lapses Affect Your Rates

A lapse in coverage is almost sure to increase your rates. This is because having a gap on your record means that you could’ve been driving without insurance. Therefore, insurers will view you as a high-risk driver. People with this label tend to pay much more, on average, than others.

If you can’t find coverage, you may have to work with a non-standard insurance provider. These are companies that deal specifically with high-risk drivers. As you might expect, non-standard insurers are far more expensive.

Another way you can get an auto policy if it feels like nobody will cover you is by joining your state’s assigned risk pool. By doing this, your state can assign you to an insurer that participates in the pool. Even people who’ve gone a long time without coverage or have a bad driving record can get insurance by enrolling in a state-assigned risk pool.

Grace Periods for Not Paying on Time

It’s not uncommon for auto insurers to offer a grace period if you don’t pay your rates exactly when they’re due. Progressive says that most people should be fine if they miss their monthly payment by just a few days. Any more than that, however, could end up being an issue.

How much of a grace period you get will largely depend on your insurer. It’s never a bad idea to double-check with your agent or carrier to find out how much time you have to pay your premium before you lose your coverage.

By law, your insurance company must give you a certain number of days of notice before it cancels your policy. This will vary by state. But, per The Hartford, you’ll typically have about ten to 20 days of notice that you need to pay your bill. If you can’t pay on time, you’ll risk a coverage lapse.

Consequences of Allowing Your Coverage to Lapse

Not having any insurance while still owning a car can create a host of problems. Below are some real consequences you could encounter if you have an auto coverage lapse:

Risk of Financial Ruin

Getting into a car accident without having at least liability coverage can put you at risk of financial ruin. For instance, if you cause an accident, you’ll have to pay out of pocket for the damages, legal fees, medical bills, and more.

Legal Problems

In states that require it, being caught driving without insurance can lead to expensive tickets and other legal issues. As an example, getting behind the wheel without coverage in Arizona leads to a $500 fine, a three-month suspension of both your driver’s license and vehicle registration, and a three-year SR-22 requirement. While punishments can be different in each state, expect most to take lapses seriously.

The following are some common penalties for not having auto coverage:

  • Fine or ticket
  • SR-22 requirement as proof of coverage going forward
  • Driver’s license and vehicle registration suspension
  • Car impoundment (must have insurance to get it back)
  • Jail

Your Premium Will Increase

As we mentioned, lapsing on your coverage will make most companies view you as a high-risk driver. This will increase your rates and could make it hard to find auto insurance, especially at an affordable price.

One way you can find cheaper coverage is by comparing insurers. Though you’ll likely see inflated prices due to your lapse, you may find one with friendlier rates or benefits than others.

What to Do After a Break in Coverage

While lapsing on your coverage isn’t ideal and could lead to some penalties, there are some positive steps you can take to deal with it. Keep in mind, though, that it’s best to act quickly to avoid legal issues or the temptation to drive without insurance.

As a first step, Progressive recommends contacting your former insurer to see if you indeed had a lapse. If you’re still in the grace period, chances are you could pay your bill and maintain your policy. You can also work with your previous provider to see about reinstating your policy.

If you can’t get your old policy back, you must get a new one as soon as possible with a new company. This will get you back on the road legally and will ensure that you have financial protection in case of an accident.

Frequently Asked Questions

What happens if I can’t pay my auto insurance bill?

If you can’t pay your auto premium on time, your insurer could cancel your policy. This triggers a lapse, meaning you’ll no longer have coverage. Your top priority, if this happens to you, should be finding a way to get a new policy. Driving without insurance is illegal in most states and could get you into serious legal and financial trouble.

How do I avoid a lapse in coverage?

The best way to prevent yourself from having a coverage gap is to pay your rates on time. Of course, mistakes can happen. But it’s crucial to stay on top of things. Another good way to avoid lapses is by enabling automatic payments. This way, you won’t have to worry about manually paying your premium. And, as we touched on earlier in the article, it can get you a discount.

You can also enroll in paperless billing with your provider. Doing this eliminates the need to keep track of physical documents and, if your insurer offers it, you could receive another discount on your rates.

How long do I have before my coverage lapses?

This can vary. Many insurance companies offer a grace period of a varying number of days before you’re in danger of losing your policy. Providers are also typically required by law to give you advance notice before they terminate your policy. Be sure to check in with your agent or insurer to see how long you have to pay your rates if you’ve missed a payment.

Do I need an insurance policy if I don’t own a car?

Even if you don’t have your own vehicle, it’s smart to have auto insurance. If you still have a driver’s license and decide to drive someone else’s car, it can be helpful to know you have protection if you get into an accident and property damage or injury occur. Not having a policy can also give you an unsightly gap in your coverage timeline, which will raise your rates when you choose to purchase a policy again.

One good option is non-owner coverage. It provides basic liability insurance to people who don’t own a car. These are are cheaper than regular policies and help ensure you have at least your state’s minimum required limits so you don’t have a lapse.


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