What To Do If Your Auto Insurance Policy Lapses
An auto insurance lapse can leave you highly exposed to risk and penalties and should be avoided; however, if it does happen, you need to know how to remedy the problem.
You will have to deal with the fines and penalties as they come, but your main priority is to get coverage. How you handle the situation can affect your ability to get affordable car insurance in the future.
What Is an Auto Insurance Lapse?
A lapse in car insurance coverage means you own a vehicle that no longer has the state-required minimum coverage limits.
The auto insurance industry considers the lapse period to be from the time your coverage stops until:
- You get new car insurance coverage (or your coverage is reinstated).
- You surrender your vehicle plates.
- Your vehicle registration expires.
- Offer proof that your vehicle no longer requires car insurance (e.g., paperwork showing that it was repossessed).
- You've purchased the minimum coverage limits in your new state (if you've moved).
Common Reasons for Coverage Lapses
Drivers who suffer a lapse often do so because of a cancellation of their car insurance policy due to:
- Nonpayment of premium.
- Late payment.
- Failure to renew.
- Excessive traffic violations or serious accidents.
If your insurance company drops you for some reason, you need to get a new policy in place before the old one expires. Also, if you choose to switch providers, you must make arrangements carefully to avoid a lapse between when your current auto insurance policy ends and your new one begins.
The Costs of an Insurance Lapse
Letting your car insurance lapse can create multiple problems. When your insurance company notifies the DMV that they no longer cover your car, you are subject to a number of penalties that vary by state.
Common penalties for car insurance lapses include:
- Driver’s license suspension.
- Vehicle registration suspension.
- Fines and reinstatement fees.
- SR-22 financial responsibility filing requirement.
Also, remember that there are severe consequences for driving uninsured. If you are caught driving without insurance you face:
- Community service.
- Driver's license suspension.
- Increases of your premium.
Lastly, if you drive uninsured and cause an accident, you are financially responsible for damages and injuries that occur. Without auto insurance, these costs can add up quickly and be devastating to your finances.
Future Insurance Implications
A gap in coverage can make it difficult to get a new policy, too.
The insurance provider may raise your rates or label you a high-risk driver and refuse you coverage. Once labeled a high-risk driver, it can be difficult to find affordable car insurance rates.
Handling an Expired Policy
When Your Policy Expires
If you find that your car insurance policy has expired, contact your carrier right away. The agent may be able to reinstate the policy without any penalty if it has been only a few days. If the lapse has been longer, you may be unable to reinstate your policy.
Avoid driving until you get an updated insurance card. If the provider offers an online payment system, they may have a way for you to print out your new cards.
When Your Policy Was Canceled
If your policy was canceled due to nonpayment of your premium or for traffic offenses, such as excessive tickets, it's unlikely your car insurance company will be willing to reinstate your coverage.
In such cases, it might be necessary to shop for a new insurance provider. Keep in mind that if your policy was canceled, other car insurance companies in the market may look upon you less favorably and, in turn, charge you higher rates.
Any time you are shopping for a new policy, make sure to get at least 3 quotes. This is easy to do, as many websites offer free online car insurance quotes.
Shopping for a New Policy
A lapse in insurance coverage reflects badly on you. Insurance companies base their premiums on how they rate your perceived responsibility and risk. Not having insurance suggests you are less than a responsible driver and could subject you to higher rates, classification as a “high-risk driver," or even denial of coverage.
If you have problems getting insurance, you can try your state's automobile insurance plan. This is a state program that allows drivers who've been labeled high-risk and who've been denied insurance to be able to get the minimum required coverage.
If you must get high-risk car insurance or insurance through your state's automobile insurance plan, you can expect to pay more for coverage for a number of years. If you keep up your car insurance and avoid any further lapses, however, you will eventually qualify for better premiums.
Avoiding Future Lapses
You can avoid having another auto insurance lapse by:
- Making sure your registration and license information are current.
- Surrendering the plates for a car that you no longer own.
- Responding to all correspondence from the insurance company in a timely manner.
Amanda Lautieri Limited Lines Auto Agent