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Penalties For Making A Late Auto Insurance Payment

What happens if you are late making auto insurance payment? While the rules vary from state to state and by provider, it is safe to say that paying your insurance premium on time should be a priority.

This page will go over what common consequences for nonpayment of premium.

Car Insurance Payments: How Late Is Too Late?

While there are many car insurance companies who won't cancel your policy after one or two days, most often they will have the right to. You may get a notice that tells you your payment is late and will be canceled on a specific date if payment is not received.

If your auto insurance provider does elect to cancel your policy right away – for example due to a history of late payments – don't count on them reinstating the policy once the premium is received. You may find yourself looking for a new car insurance company.

You may also face higher premiums in the future, as insurance companies base your rates on perceived responsibility and risk. Making late payments signals to your car insurance provider that you present increased risk to the company.

What About Grace Periods?

Whether to offer a grace period is up to the provider, but in most states, car insurance companies are under no obligation to extend extra time for payment of the premium.

If you are afforded a grace period, you will likely pay for it in late fees, effectively raising the overall cost of your policy. It is better to assume there is no grace period and pay by the due date.

Cancellation for Nonpayment of Premium

If your car insurance has been cancelled for nonpayment of premium, you are subject to:

  • An insurance lapse.
    • Driving without the minimum coverage will stain your driving record and lead to license suspension, fines, or worse.
    • If you get into an accident without insurance, you can face financial devastation.
  • Increased premiums in the future.
  • Being labeled a “high-risk driver."

Note that you don't have to be pulled over for the Department of Motor Vehicles (DMV) to find out about a lapse in insurance. Car insurance companies typically notify the state DMV when they cancel a policy due to nonpayment.

Consequences for driving without current auto insurance vary, but you're typically at risk of the following:

  • Fines.
    • Example: New York charges $8 a day for the first 30 days you go without car insurance. It goes up to $10 a day for 31 to 60 days late and $12 a day for 61 to 90 days late.
  • Driver’s license suspension.
  • Registration suspension.
  • SR-22 insurance filing requirement.
  • Jail time.
    • If you were involved in an accident while uninsured, you are subject to arrest.

Will I Be Notified Ahead of Time?

Whether you are notified of impending legal penalties for an insurance lapse depends on the state.

For example, some states require car insurance companies to send out a letter reminding you that no longer have insurance with them, and that the state will suspend your license on a certain date unless you update your information with the DMV.

The state driving agency may also send you a notice. In Nevada, for example, the DMV sends out a request for auto insurance verification once they receive notification from the insurance company of the cancellation.

If the DMV does not hear back, they send a certified letter requesting proof of insurance and notifying the recipient that their driver's license is suspended. When your license is suspended, you must pay a reinstatement fee and meet any other state-mandated requirements before you can get your driving privileges back.

The Benefits of On-Time Payment

When you look at the consequences, it becomes clear that paying your car insurance early is in your best interests. It shows your current car insurance company, as well as potential future companies, that you are a responsible customer who presents low risk of nonpayment.

Also, it is a practical way to avoid fees, high auto insurance premiums, and gaps in coverage that can lead to harsh penalties and exposure to high financial risk in case of an accident.

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