Car Insurance Policy Lapses

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 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. For example, Delaware residents face a $1,500 fine for a first offense.
   • And 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?

While it’s best to avoid any lapses at all, a short lapse can typically be corrected if you act quickly. If you miss your payment, your insurance company will send you a notice of cancelation, giving you a specific number of days to cure the default before actually terminating your coverage, according to Policygenius. This period of time is often referred to as “grace period,” allowing you to catch up on missed payments or giving you time to avoid a full cancelation and a serious lapse in coverage.

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. There are ways to address the situation promptly once any car insurance lapse grace period ends. Grace periods vary but they can range anywhere from 3-30 days. Here’s what you should do when your insurance coverage lapses.

• Stop driving. Whether you just discovered your lapsed coverage, have been cited for it by a law enforcement officer already, or are hoping for the best while driving with lapsed coverage, stop!
• Contact your insurer: You might have a chance to reinstate your policy if it’s for something small like a missed payment, and if you act quickly, it could be reinstated as if this small lapse never happened. If your policy can’t be reinstated or it costs too much, it’s still important to act quickly. In this case, you should start shopping for a new policy immediately so that you’re covered when your grace period on the old policy ends.
• 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 person who holds the policy in question. Their insurance agent will be able to help.
• Identify what steps your state requires—including fees or penalties assessed—to reinstate your license. Providing proof of insurance will almost certainly be the first step, so have that handy.

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.