How Car Insurance Coverage Lapses Can Affect Rates

Letting your car insurance lapse may not seem like a big deal, but it is. Any gap in coverage can cause all kinds of problems for you – from state fines, to higher premiums, to being unable to get coverage at all. Here’s what to do if you find yourself in this situation.

car keys on auto insurance policy papers

So, you didn’t pay your car insurance premium on time and your provider canceled your coverage? Or maybe they dropped you because you just didn’t bother to pay your premium at all? Or perhaps you simply forgot to renew your policy?

Whatever the reason, if you don’t have auto coverage after having it for even a short while, it’s considered a car insurance lapse.

Who cares? Your insurer cares, for starters. And your state’s department of motor vehicles cares, too.

Most importantly, though, you should care. Why? A lapse in coverage is sure to cost you. Many states fine you if your car insurance lapses. Most will suspend your vehicle registration as well – and even take away your license plates if things get bad enough.

As for insurance companies, they’ll charge you more when you buy coverage again. At worst, they’ll refuse to cover you.

You’ll learn more about each of those situations below. You’ll also learn about:

  • What happens if your car insurance lapses
  • How much a lapse in coverage will cost you
  • How you can reinstate lapsed car insurance

What is a Lapse in Car Insurance?

Your car insurance lapses if you go from having coverage to not having insurance.

And as you just read, a lot of different situations can cause these lapses. You pay your premium too late. You forget to pay it at all. You don’t renew your policy for some reason or other. Your insurer drops you because you’ve been in too many accidents or gotten too many tickets. You sell your car and don’t drive for some time.

It can even happen while switching insurance companies. If you’re not careful, you’ll leave a gap between when your old policy ends and your new one begins.

What Happens if My Car Insurance Lapses?

Companies care if your car insurance lapses because it suggests you’re either risky, irresponsible, or both. In other words, a lapse in your coverage can make you a high-risk driver in the eyes of your insurer. Car insurance for high-risk drivers always costs significantly more.

As a result, insurers charge higher rates to people who have gaps in their coverage. They may even refuse to cover such drivers at all.

How Much Do Rates Go up After a Car Insurance Lapse?

When you let your car insurance lapse, your rates increase.

How much higher are we talking about here? Well, if your coverage lapse only lasts a couple of days, your premiums might go up by just a few dollars. If it lasts a lot longer than that, though, don’t be shocked if they go up by $20 to $50 or more.

In fact, if your car insurance lapse lasts over 30 days, you could see a rate increase of 30 to 40 percent compared to what you paid previously.

Those increased rates will stick around for a while, too. Six months is about the shortest amount of time you can expect to pay more for car insurance after a lapse. You might pay more for a couple of years.

How Long Can You Go Without Car Insurance Before It Lapses?

It ultimately depends on the insurance company. In general, though, you should have between 10 to 20 days to fix things before an insurer cancels your coverage. That includes paying your premium, buying a new policy, or renewing your current one.

Some people call this the car insurance lapse grace period. If you don’t have a policy in place by the time this grace period ends, that’s when your gap or lapse begins.

Some good news here: your car insurance provider won’t just drop you without warning. In fact, as Progressive points out, state law requires them to notify you before they cancel your policy.

What Should You Do After Your Car Insurance Lapses?

The first thing you should do after you realize your car insurance has lapsed is contact your insurer.

A company representative might be able to reinstate your policy. And not only that, but they might be able to keep you from being penalized for the lapse, too.

You need to do this right away, though. Some insurers will reinstate a lapsed policy if it’s only been inactive for a few days, according to Nationwide. Few will do that if it’s been a few weeks or more. I

But don’t expect your car insurance provider to reinstate coverage it canceled because of accidents or traffic offenses. Most only do so if you miss a payment or forgot to renew. t’s not uncommon for an insurance company to give you the benefit of the doubt if it’s your first time forgetting to pay your premium. That might not be the case if you’ve had several late payments.

What if your insurer won’t reinstate your lapsed coverage? Start shopping around immediately. The longer you wait, and the bigger your car insurance gap is, the more you’re going to pay for your next policy.

In the meantime, do not drive uninsured. Not only is it illegal, but it can be costly, too--especially if you get into an accident.

How Do You Reinstate Lapsed Car Insurance?

Contact your insurance company. If your coverage only lapsed a few days ago, they may reinstate it without much fuss. You’ll have to address what ever issue led to the car insurance lapse, of course.

Go longer than that, though, and you might have to find yourself another provider and policy. Again, act quickly. The longer you leave your insurance lapsed, the more it’ll cost you in the long run.

Fines and Penalties for Car Insurance Coverage Lapse

Most states both fine and penalize you if you let your car insurance lapse.

How do they even know when one of these gaps happens? They know because insurers tell them.

As for why they care, and why they fine you for a lapse: it’s the law. To put it another way, all states but New Hampshire require drivers to at least have auto liability insurance. When your insurance coverage lapses, you don’t have the legally required insurance.

Here are some of the most common ways states penalize people with lapsed car insurance:

  • Suspend their driver’s license or vehicle registration
  • Confiscate their license plates
  • Fine them in various ways (such as for the lapse itself and to reinstate their registration or license)
  • Require an SR-22

Every state has their own rules and regulations regarding insurance lapses. Here’s how some states specifically treat a lapse in coverage. If your state’s not listed, contact your department of motor vehicles to find out.

Alabama

$200 fine for first offense, $300 for second, $400 for third and subsequent ones. Also, Alabama may suspend your license for 90 days if you don’t pay the fine within 45 days.

Connecticut

$200 “civil penalty” for each lapse. Similarly to Alabama, Connecticut suspends your vehicle registration until you pay the fine and provide proof of insurance.

Georgia

$25 fine for the lapse, $60 fine for registration reinstatement. And Georgia will fine you $160 if your insurance lapses twice in a five-year period.

Illinois

$100 reinstatement fee. Plus, Illinois suspends your license plates until you show “current evidence of insurance.”

Maryland

$150 fine for the first 30 days of a lapse, $7 for every day after that. Also, Maryland charges you a $25 fee to restore your vehicle's registration.

Ohio

$100 reinstatement fee for first offense, $300 for second, $600 for third and subsequent ones.

South Carolina

Up to $400 reinstatement fee. And South Carolina suspends your vehicle registration and license plates until you pay.

Vermont

Fine of at least $400 for first offense, $1,000 for second and subsequent offenses within three years. Vermont also suspends your license until you pay the fee and provide proof of insurance.

How Can You Avoid a Lapse in Car Insurance Coverage?

Be responsible. Pay your premiums on time. Make sure you know your policy’s end date so you don’t forget to renew it. Don’t ignore any snail mail or email your insurance provider sends your way.

If you decide to switch car insurance companies, have your new policy start the same day your old one ends so there’s no gap between the two.

And if you’re having a hard time affording your coverage, contact the insurer. Do the same if you’re not going to use your car for a while--such as if you’re being deployed, or if you’re going to study abroad. Don’t just let your coverage lapse. An agent or customer service representative may be able to help, or at least suggest some alternative solutions.

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