Auto insurance is important for many people. Along with it being absolutely mandatory, there are lots of benefits for the policyholder in case of an accident or road injury. An auto insurance policy provides protection in a number of ways; and is legally required too.
In almost every state, you can’t drive your car around even for a yard without having insurance. So as soon as you own a car and are driving around, make sure you have car insurance.
There is always a fixed date of paying premiums each month, by which the policyholder has to pay to keep the policy active. If they’re unable to pay and the due date passes by, there is a grace period granted in most policies. Within that grace period of the payment is made, the policy stays in force. Otherwise, it lapses.
Table of Contents
- 1 What is Auto Insurance and how does it work?
- 2 Can you own a car without Insurance?
- 3 How long can you drive without Insurance after buying a car?
- 4 What happens if you pay Car Insurance late?
- 5 What is the Grace Period for Health Insurance?
- 6 Grace Period for Life Insurance Policy
- 7 Conclusion
What is Auto Insurance and how does it work?
Auto insurance is a policy that protects your car against financial blows from damage or theft. If a policyholder find themselves in a road accident, the insurance policy covers:
- Personal bodily injury
- Liability (damage you cause others)
- Medical expenses
For a full coverage, the charges are of course more, but there is a cheaper option for policyholders to go for a partial coverage option. Insurance policy premiums are paid each month to keep the policy in force, and when the time comes, you can have the policy cover for your accident expenses.
Can you own a car without Insurance?
If you’re in New Hampshire state, then yes, you can own a car without insurance. For all the other states, you can’t drive a yard without having insurance. And if you’re caught doing so, your license could be confiscated and you’ll be having a hard time with cops.
Technically you can purchase a car without insurance, but you won’t be able to drive it, so the best way to go about it is to apply for insurance immediately. And if you don’t want to pay higher premiums, go for a partial coverage option.
How long can you drive without Insurance after buying a car?
If you’re buying your first car, you obviously don’t have auto insurance. And in many states it is illegal to drive your car without insurance. So much so, the car dealer may not give you the car until you’ve proven you have at least applied for insurance. So you must have insurance as soon as you’ve purchased a new car.
But if you already have insurance and you’re purchasing a new car, you get a grace period of 7 to 30 days during which you have to contact your insurance company and sign up your new car. Of course, if you miss that, there could be legal consequences for you.
There are penalties if you’re caught driving without insurance such as:
- 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.
What happens if you pay Car Insurance late?
Your auto insurance will lapse if you don’t pay your premiums on time; in simple words, the policy is cancelled and your car is no longer insured.
If you’ve accidentally missed your premium payment during a certain month, most insurance companies offer you a grace period for car insurance payment of 10-20 days during which you have to pay your dues. However, some companies do NOT give you even a day’s leverage before they cancel your policy.
A lapse in auto insurance policy creates a negative impact on the borrower’s overall credit rating; this will affect when you’re going to apply for more insurance, student loans or even a mortgage.
Cheapest Auto Insurance for Lapse in Coverage
If you’ve had an insurance policy that has lapsed because you also missed the grace period, there are chances you won’t find any cheap options. The best way to go about it is to shop around and look for cheap rates.
Minimum vs. full coverage average annual rates by company:
|Company||Full coverage||Minimum coverage||Annual difference|
According to The Balance, they charge a minimum fee of $10 for renewal of the car insurance policy, but the premiums could be higher than you were originally charged for.
If your insurance policy has lapsed for two weeks only and you want to get it renewed within those two weeks, you can be renewed in less time. But if your previous auto insurance policy was cancelled and it has been almost six months or a year to that, you will have to start off again. Which means submitting an application again, sending your documents again and this time maybe you will be charged higher premiums.
Now that you know that the premiums will be higher, there are still ways that you can reduce those rates.
- Point blank ask for discounts that you may be eligible for
- Decrease your overall coverage
- Increase your deductibles
- Shop around for inexpensive insurance policies
This time when your policy is renewed, JUST DON’T MISS THE DATE! If your insurance policy is cancelled again, it could actually affect negatively on your record and you may find it harder to even qualify for an insurance next time.
What is the Grace Period for Health Insurance?
Your health insurance company could end your coverage if you fall behind on your monthly premiums. But before your insurance company can end your coverage, you have a short period of time to pay called a grace period.
A short period- usually 90 days- after your monthly health insurance payment is due. If you haven’t made your payment, you may do so during the grace period and avoid losing your health coverage.
Health insurance was mandatory until the Trump Administration came along- Obamacare was a healthcare initiative that made health insurance mandatory for all people. However, as of 2019, this doesn’t apply anymore. Obamacare is still in effect, but there is no more penalty for not having medical coverage.
The punishment for inability to have ACA-agreeable health insurance is equivalent to it would have been under the federal level. It cost a family $695 for each uninsured adult and $347.50 for each uninsured kid or 2.5% of the family unit pay, whichever sum is more prominent.
Grace Period for Life Insurance Policy
Depending on the insurance policy, the grace period can be as little as 24 hours or as long as 30 days. The amount of time granted in an insurance grace period is indicated in the insurance policy contract. Paying after the due date may attract a financial penalty from the insurance company.
But, what to do if your life insurance policy is cancelled? Is there a renewal process? YES!
Renewing Insurance Policy
Renewing your insurance policy isn’t as complicated these days, but of course it is an added hassle that you would have been able to avoid if you had paid your premiums on time. Or if the policy requires annual renewal, chances are that your insurer will inform you two weeks prior to when the policy is expiring.
If you want to continue being insured under the policy, you can simply keep paying your premiums. If you don’t want to, you have the option of surrendering your policy altogether, of course that way you will be required to pay a fee.
When you get a policy renewed, there are chances that your premiums may spike. That is part of the insurance plan that your company should tell you right in the start. So don’t worry if you find yourself paying higher premiums after the policy is renewed; it’s completely normal.
But, a lapse in policy isn’t the only reason you get it renewed. There are certain times when you would want to renew a policy:
- Change in address: It is important for you to ask your insurer if the change in address would affect your premiums because sometimes geography does matter when it comes to the kind of policy plan and the premiums that were initially decided on the policy.
- Change in marital status: You might want to get your spouse insured now, and maybe your insurer could give you a discount on your existing policy if your spouse were to also get insured from the same company.
- Change in car insurance: If you have recently started using your car for commercial purposes like deliveries or driving an Uber, you will be insured under commercial auto insurance which will change the premiums you paid initially.
- At the end of the financial year: Like i mentioned above, most insurance policies do need renewal after the end of the year and could include a renewal fee and higher premiums.
Like a responsible citizen, you should be informing your insurance company for any of these changes. Policies can be renewed by either writing an insurance renewal letter or calling the company’s helpline.
A car insurance policy is mandatory to have by state, and to keep this policy active you have to pay premiums regularly. Sometimes insurance companies give you a grace period of 10-30 days after the due date.
Of course many companies do give a grace period of a couple of days which is enough for you to arrange a premium by taking a small loan from a friend or family- that’s still better than having the whole policy lapse which could have you go through the whole renewal process. And besides, driving an uninsured car is illegal and may invite so many other consequences which you might want to avoid.