What Happens If Car Insurance Lapses?

Don’t panic if your Car Insurance lapses; we have a way out!

For many states in the country, having car insurance is an absolute necessity.

And frankly speaking, you should have your car insured.

Auto insurance protects cars and drivers in case of road accidents or injuries. The insurance company then pays the medical bills or car repair bills attached with the accident. Any type of mishap that your or your insured vehicle faces (damage or theft) will be covered under the insurance protection plan. If you pay your premiums on time every month, you will very easily be able to keep the policy in force.

There are minimum and maximum coverage options when it comes to auto insurance, in a minimum liability coverage, the insurance company covers bodily injury and property damage. In a full or maximum coverage option, there are further expenses that are also covered for instance if you’ve caused damage to state property and you were at fault, any off-road charges, collision, damage you do to others etc.

Of course, minimum coverage has lower premiums than maximum coverage. As tempting as it sounds to opt for maximum coverage where every expense is fully covered by your insurance company, don’t forget you will have to pay a high amount of premiums.

Just evaluate within yourself what kind of coverage you really need because every month the premiums will be coming out of your pocket.

What if I have a Lapse in Auto Insurance?

Your car insurance can lapse if you don’t pay your premiums on time. Whether you’ve run out of money or forgot to pay it, in both cases your insurance is very much likely to get cancelled.

What happens then?

Lapse in auto insurance means that your vehicle is no longer insured, so if you get into accidents or road injuries, you will NOT have the financial protection you signed for initially.

This is one consequence if the auto insurance lapses.

The other thing that can happen is the State can revoke your driving privileges.

In many states having car insurance is necessary, so if you’re ever caught driving without an insurance or if you’re in an accident and you’re not insured, your license may be confiscated.

Car Insurance Lapse Grace Period

A grace period is the amount of days that you can go without paying your premium. Some auto insurance companies do NOT have even a day as grace period, whatever date was originally decided for paying premiums has to be it.

But there are some states that require companies to offer a grace period of at least 10-20 days to a policyholder. This period is basically a warning time period before the insurance company reserves the right to cancel your insurance.

Can a Lapsed Insurance Policy be Reinstated?

If you pay within your grace period time, great; your car is still insured under the policy. However if you miss the grace period limit again, your insurance will automatically be cancelled. This will make it harder and even more expensive for you to get car insurance after lapse in coverage, so make sure you don’t get to the point where your policy could lapse.

It is possible to have a lapsed policy reinstated, but there is added hassle and additional charges that you would definitely want to avoid.

If your policy lapsed a week or two before, you should immediately contact the insurance company and request them to revive your policy, of course you will have to pay a certain amount of fee for that to happen and maybe this time the premium amount will be higher. But if it has been a couple of months or a year that you have not been insured, chances are you will have to start from scratch.

Be prepared to go through the entire application process again. This time you can also shop around and look for another insurance company that may have a better package designed out for you.

How long can you be without Car Insurance?

In some states, it is illegal to have an uninsured vehicle on the road. You can’t even drive for a minute without auto insurance and if you’re caught, there is a definite  penalty for driving without insurance.

Penalties include:

  • Ticket for not being insured starting from $100, and you could face higher premiums when you get the insurance reinstated because of this violation.
  • Driving license could be revoked, a 60-90 day suspension is actually very common.
  • Suspension of vehicle registration for up to 60-90 days. However in states like Texas, this could be dragged to upto a year or two.
  • Other monetary fines that often start from $100 and could go up to $500 depending upon the situation.

If your uninsured vehicle is sitting in the garage, that’s fine. As long as it is off the road. But as soon as you’re setting off for a drive, the legal radar is going to be on you; so it’s best to have your vehicle insured as soon as possible.

And why do you want to take a risk? Americans are some of the most reckless drivers, you probably can’t save yourself on the road but you can get away without paying for the losses! Sounds like a fair deal to me.

What happens if you don’t pay your Car Insurance?

In very simple words, your car insurance will be CANCELLED.

This is literally the whole point of this article, to not reach the point where your policy could actually lapse.

Depending upon several factors, your insurance premium is decided upon the start of the policy. The premium is actually very low and affordable if you’re a careful driver and you have a clean driving record because the insurance company finds it less risky to be investing in you.

For whatever reason your premium was missed, even a rookie mistake like you ‘forgot’ the due date, your policy will be cancelled. If your insurance company allows you a grace period time of 10-20 days, you HAVE to pay the pending premiums during this time. If you can’t, your policy will lapse. It is literally as simple as that.

And if you’re seen driving around the country without car insurance, it would invite more consequences before you even apply to reinstate it.

Tony Bennett

Tony Bennett

Tony Benett makes his living in the insurance industry by teaching and consulting. He is also recognized by the legal profession as an expert on insurance coverages. His insurance experience includes having worked at the company level, owned an independent general agency and having worked for an insurance association. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. At Insurance Noon, he is known for his in-depth analysis and attention to details with accuracy. He has been published as one of the most referred agents by his peers in the insurance community. Tony loves the outdoors and most sport events. His passion other than providing excellent advice is playing golf.