Last updated: June 2023
In many situations, we're comfortable letting things go. Maybe the kitchen garbage isn't taken out right away. Sometimes our dirty laundry spills over the top of the hamper. Most of the time, little harm comes from such lapses. But with an auto insurance lapse, it’s a different story. We’ll explain what car insurance lapses are, what happens if car insurance lapses, grace periods, and more.
What is a lapse in car insurance?
If you go any period without insurance coverage on your vehicle, that is called a lapse in coverage. You might experience a lapse in coverage for one of the following reasons:
- If your policy is canceled or not renewed by the insurer
- If you let your policy run out without renewal
- If you switch policies/insurers and have a space between your previous policy’s end date and your new policy’s start date
Essentially, if you fail to pay your premium (whether that’s monthly, biannually, or annually), for one reason or another, you’re in danger of a lapse in coverage. If you drive recklessly or break any terms as specified in your policy, you could face a policy cancelation or nonrenewal and a lapse in coverage. Switching insurance companies? 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? 3 possible consequences
1. It could cause financial hardship
Some people allow their car insurance to 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. You could be paying anywhere from a few hundred to a few thousand dollars depending on where you live and if it’s your first offense.
These fine amounts could be the least of your worries if you cause an accident while driving with lapsed car insurance. You could then be liable for your car and your injuries plus damages and injuries you cause to others and their property.
Lastly, your future insurance rates are likely to increase if you have a lapse on your record. Why? Because insurers might begin to see you as a high-risk driver.
2. You could lose your license or registration
In some cases, a lapse in car insurance coverage could lead to you losing your license or vehicle’s registration. Not having a driver's license or vehicle registration can prove to be a major inconvenience because unless you're living in an area with reliable public transit, getting to and from work, running errands, and seeing friends without being able to drive legally becomes more difficult.
It's also worth noting that some states, like North Carolina, require insurance companies to notify the Department of Motor Vehicles if your liability insurance lapses for any reason. In other words, you could face these consequences without being pulled over or being involved in a wreck without insurance.
To get your license or registration reinstated, you’ll also typically have to pay a fee, 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?
There’s really no such thing as a car insurance lapse grace period. However, if you miss your payment due date, your insurance company will send you a notice of cancelation, giving you a specific number of days to make a late payment before they actually terminate your coverage. This period of time (which can vary from state to state) is often referred to as a “grace period.” If you fail to make your payment by the cancelation date, your policy will lapse, and you will no longer have coverage, meaning you will be on your own for any damages.
After your coverage is terminated, you might be able to contact your insurer and ask for a policy reinstatement (if they offer it), but reinstatement is often conditional. For example, you might be able to get your Direct Auto policy reinstated if:
- The cancelation is fewer than 30 days (varies by state).
- You didn’t have an accident in the time between your policy cancelation and the time you’re applying for reinstatement.
- You pay all money owed, including any potential reinstatement or cancelation fees.
One benefit to reinstatement is that you might be able to have your policy reinstated back to the cancelation date, meaning your insurance history doesn’t have 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.
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 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 minor wreck, it’s always a good idea to give your insurance company a call. You don’t want them to be surprised if a claim is filed and 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. This 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.
What To Do If Your Car Insurance Lapses & How to Get Covered Again
Fortunately, you still have options if you find yourself in a situation with lapsed car insurance coverage.
- Contact your insurer: If you missed a payment and your policy was canceled, your insurance company might allow you to reinstate your policy back to the cancelation date. This can help you avoid a lapse in your insurance history. However, you’ll have to pay everything you owe, including potential cancelation or reinstatement fees, and you might have to sign a no-loss statement. If your policy can’t be reinstated, you’ll need to shop for a new one.
- Arrange for alternative transportation until you can legally drive again. Friends, family, and public transportation are good places to start!
- Check if you can be listed as a driver on someone else's policy temporarily. This is generally possible if you live at the same address as the policyholder. Their insurance agent will be able to help.
- Identify what steps your state requires—including fees or penalties assessed—to reinstate your license. If you were caught driving uninsured and had your driver’s license taken away, providing proof of insurance will certainly be the first step. So be sure to purchase state-approved coverage and be prepared to pay potential fines.
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.