What Is A Lapse In Car Insurance?

Any period you go without coverage on your vehicle is called a car insurance lapse. Even a one-day gap in coverage would mean you're driving uninsured. It's risky to have an insurance lapse because you would no longer be meeting your state's minimum coverage requirements or be protected financially in the event of an accident. However, if you experience one, don't worry – options are available to get you covered again.

What Causes An Insurance Lapse?

You might experience a lapse in coverage for any of the following reasons:

Missed payments

Missing your payment for one reason or another may put you in danger of a lapse. Fortunately, you can avoid having your policy terminated if you act quickly. Insurers must give advanced notice before canceling your policy. Usually, if you pay the outstanding balance and any fees before the cancellation date, your policy can be reinstated.

Expired policy

An insurance policy that reaches its expiration date and is not renewed can lead to a lapse in coverage. Therefore, it is important to be aware of your policy expiration date and renew it promptly if it is not done automatically by your insurer. Otherwise, if you let your policy run out without renewal, you could face a lapse in coverage.

Cancellation by the insurer

Insurers can cancel a policy for various reasons, such as non-payment, misrepresentation of information, or increased risk (e.g., reckless driving). If any of these apply, you could face a policy cancellation or nonrenewal and a lapse in coverage if you don’t have another policy in place.

Switching policies

If you switch your insurance company or policy, you should avoid having a break between your previous policy’s end date and your new policy’s start date. Otherwise, if you don’t have your new policy start as soon as your old policy ends, that gap in coverage is a lapse.

What happens if your car insurance lapses?

1. It could cause financial hardship

Some people let their car insurance lapse because they cannot afford it. However, the financial penalties associated with lapsed coverage can cost exponentially more than car insurance premiums. There's no “getting off with a warning” if you're pulled over without car insurance. Depending on where you live and if it's your first offense, you could have to pay anywhere from a few hundred to a few thousand dollars.

But the fines are just the start. If you're in a car accident without insurance, you may be responsible for paying for the resulting damages and injuries to others and yourself. Lastly, your future insurance rates can increase if you have a lapse on your record due to insurers considering you a high-risk driver.

2. You could lose your license or registration

In some cases, a lapse in car insurance coverage could lead to losing your driver's license or vehicle registration, which can be a major inconvenience if you rely on driving to get to and from work, run errands, and see friends.

It's worth noting that some states require insurance companies to notify the Department of Motor Vehicles if a driver's liability insurance lapses. In other words, you could face these consequences without being pulled over or involved in a wreck without insurance. You'll typically have to pay a fee to reinstate your license or registration, which only piles on to the financial hardships we discussed above.

3. You could lose your freedom.

Losing your driver's license can mean losing the freedom of transportation. Remember being a teen without a license? Additionally, in some states, your license won't be the only thing that gets taken away if you get caught without car insurance - your car could be impounded, too! And if you already have several lapses on your record or cause a major wreck without coverage, you could lose your literal freedom. That’s right, we're talking jail time. Yikes!

Is There A Car Insurance Lapse Grace Period?

If you miss your premium payment due date, your policy won't be canceled instantly. First, your insurance company will send you a notice of cancellation, giving you a specific number of days to pay to prevent your policy from terminating for nonpayment. This window of time (which can vary from state to state) is often referred to as a "grace period." During this period, you may have a few days to pay without incurring a penalty, after which certain fees (e.g., a late fee) may apply. If you don't pay before the cancellation effective date, your policy will lapse, and you will no longer have coverage. Therefore, you will be on your own for any damages or consequences resulting from driving uninsured.

After your policy is canceled, you can ask your insurer for a policy reinstatement (if they offer it), but reinstatement is almost always conditional. For example, you might be able to get your Direct Auto Insurance policy reinstated if:

The policy has been canceled for fewer than 30 days (varies by state).
You didn't have an accident in the time between your policy cancellation and the time you're applying for reinstatement.
You pay all money owed to the insurer, including any potential reinstatement or cancellation fees.

One benefit to reinstatement is that you might be able to have your policy reinstated back to the cancellation date, meaning your insurance history won't show a lapse in coverage.

How to Avoid Lapses In Car Insurance

The best thing you can do is avoid a lapse entirely. Here are five ways you can make sure you maintain continuous coverage.

1. Set up automatic payments.

If you have a credit or debit card or a bank account, most insurers allow you to set up automatic payments. The charge will automatically hit your preferred payment method on the due date, meaning you don’t have to do anything manually. With Direct Auto, you can earn an auto-pay discount!

2. Renew your policy on time.

Even if you make all your payments on time, you could still suffer a lapse at policy renewal time. Make a note of when your policy expires and be sure to renew it or shop around for a new policy with that date in mind.

3. Notify your insurance company of any changes.

It’s always a good idea to communicate proactively with your insurer. For example, if you’re involved in a wreck, it’s best to give your insurance company a call. You don't want them to be surprised if the other party files a claim and, in turn, they cancel or refuse to renew your policy.

4. Stay on top of your payments.

If you didn’t set up automatic payments, make sure to set reminders to pay for your policy. Doing so can help you avoid a coverage lapse.

5. Consider paying in full.

This might not be an option for everyone, and that’s okay. However, if you’re able to pay for your policy upfront, it can help you avoid a potential coverage lapse if you forget to make a payment or the card that you have linked to your automatic payments expires.

5 Steps to Take After an Insurance Lapse

1. Contact Your Insurance Provider

If you missed a payment and your policy was canceled, your insurance company might allow you to reinstate your policy back to the cancellation date. This can help you avoid a lapse in your insurance history. You’ll have to pay everything you owe, including potential cancellation or reinstatement fees, and you might have to sign a no-loss statement.

2. Assess Your Coverage Needs

Consider all the reasons why your coverage lapsed. If the cost of your policy has been beyond your budget, you may need to adjust your coverage and limits to only meet your state's minimum coverage requirements. For example, you might drop comprehensive and collision if your vehicles hold a low value or raise your deductible amount. You can also adjust your bill date to your payday or set up auto-pay to help pay for your policy.

3. Explore Insurance Options

If your policy can’t be reinstated, you’ll need to shop for a new one. However, not all insurers offer coverage to so-called high-risk drivers after a lapse, as Direct Auto does. If your current insurer cannot reinstate your coverage and get you a policy that meets your needs and budget, it may be time to look at what other insurance companies offer.

4. Gather Quotes and Compare Policies

When comparing policies, it's generally recommended to gather at least three quotes from three different insurance companies. Make sure to consider more than just the price - think about how reliable the company is and what kind of benefits it offers. For example, Direct Auto is there for people with gaps in their coverage or a spotty insurance history. We also provide flexible payment options and discounts and have stores where you can speak with agents and make cash payments.

5. Purchase New Car Insurance Coverage

Once you've figured out your coverage needs, shopped around for insurance, and gotten some quotes, it's time to purchase your best plan. Whether you decide to stay with your current provider or switch to a new one, ensure the policy you choose fits your budget. For example, with Direct Auto, you can make cash payments at a store, set up auto-pay, or make a super low down payment to get started for less. It's all about finding payment options that fit your financial situation.

Our Support Never Lapses!

Ignoring a lapsed car insurance policy can have financial and personal consequences. Are you at risk? Call, click, or come into a Direct Auto Insurance location near you to get affordable car insurance in your state.

Insurance Lapse FAQs

Will an insurance lapse affect my insurance rates?

Yes, an insurance lapse can impact your insurance rates. Insurers may view a lapse as an increased risk, which could lead to higher premiums when you apply for a new policy or reinstate your coverage. It's essential to maintain continuous coverage to avoid potential increases in your insurance rates. However, regardless of your insurance history, you could still find affordable coverage and discounts through Direct Auto.

What are the legal consequences of driving without car insurance?

Driving without car insurance due to a lapse in coverage can lead to serious legal consequences. These may include fines, license suspension, vehicle impoundment, and, in some cases, even a jail sentence. Additionally, you may need to file an SR-22 certificate with your state to get back on the road. If you do, Direct Auto can help.

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