It’s not a position you want to be in, but it happens. For one reason or another, you find yourself without car insurance. It’s lapsed. While this isn’t uncommon, a lapse in car insurance comes with a certain amount of risk. It can also be costly to get your insurance reinstated after a lapse. Learn what you can do to avoid a lapse in insurance and what you can do to get your coverage back as soon as possible if you do experience a lapse.
What is a lapse in insurance?
A lapse in insurance occurs when you don’t have car insurance for a period of time. There are several reasons you might experience a lapse in car insurance. For instance, if you’ve fallen on hard financial times and can’t afford to pay your insurance. Or, if you simply forgot to pay your monthly insurance premium. Another reason you may experience a lapse is if you switch insurance providers and cancel your old insurance before your new insurance is activated. Regardless of why you experience a lapse, the end result is the same – your car is uninsured.
What happens if your car insurance lapses?
If your car insurance lapses this means your car is no longer covered. In almost every state, you are legally required to have car insurance if you want to drive a car. If you decide to drive without insurance and you get caught, you can face potential fines, tickets, license suspension, or car impounding. If you get in an accident without car insurance the financial consequences alone can be devastating, and you may face jail time.
A lapse in car insurance can also raise red flags to insurers. It can make you look like a risky client which often results in higher insurance rates. Depending on where you live and your insurer, your policy may include a grace period for missed payments during which your policy won’t be canceled and your rates won’t increase.
Some insurance companies do provide exceptions in some cases. For instance, some insurers will extend continuous insurance discounts for military personnel who experience a lapse in car insurance due to military deployment.
Which states impose a penalty for a lapse in coverage?
Car insurance is legally required in nearly every state in the U.S. The penalty for a lapse in coverage varies between states. Some states will charge a fine while others will suspend your license and registration on a first offense. Often states have a smaller penalty for a first offense and then increase the consequences for future offenses. In some states, insurance companies report directly to the DMV when a car owner is past due on their insurance bill, so it is easy to trace.
For instance, in New York, you can be fined as much as $1,500 for driving without insurance or for allowing someone else to drive your uninsured vehicle. If you are involved in an accident without insurance, your license and registration will be revoked for a minimum of one year. The same is true if someone else gets into an accident driving your uninsured vehicle. After your license is revoked, you can also expect to pay an additional civil penalty of $750 to get your license back.
What to do if you have a lapse in coverage
If you have a lapse in car insurance coverage, you want to aim to get it instated as soon as possible. Here are the steps you can take:
- Call your insurance provider. Speak with your provider to see if a lapse has occurred or if you have missed a payment and can simply pay it to avoid a lapse.
- Grace period. Your insurer might offer a grace period that can allow you to pay for a missed payment without canceling your policy so you can maintain continuous coverage. The length of a grace period and even whether or not it is offered can vary between providers, so make sure you speak to your provider to get the details.
- Comparison shop. If your insurer won’t provide continuous coverage now is a good time to do some comparison shopping. See what kind of deals you can get with other insurance providers before you re-sign with your previous provider. There are some providers that specialize in high-risk driver policies and may offer lower rates.
- Don’t drive. Until you are sure you have insurance, it’s best not to drive. Consider using public transportation, ride-sharing, or ask a friend or family member to help you out until you can safely drive again.
How to prevent a lapse in car insurance coverage
To prevent a lapse in car insurance coverage, pay your car insurance bill on time. If you forget your payments, talk to your provider to see if you can set up auto payments or find a way to remind yourself when payments are due.
If you can’t afford car insurance, call your insurer and see if they can work with you. Ask if they can offer you a discount or delay when your payment is due. See if you can change your coverage to a policy that costs less money. To get the cheapest policy possible, opt for your state's minimum required amount.
If you’ve tried to work with your insurer and you still can’t afford insurance, consider other forms of transportation. Think about taking public transport, using ridesharing services, or even riding your bike until you can save up enough to reinstate your insurance and feel confident about paying your monthly premiums.
What happens if your insurance lapses and you have an accident?
If you get into an accident without car insurance you can expect to pay for any damage or injuries out of pocket. This can include repair and replacement costs and medical expenses. Depending on your state, you may face fines, license suspension, or even jail time.
If you are caught driving without insurance you might have to file a Certificate of Financial Responsibility (known as an SR-22) with your state. This document is used to prove that your car insurance policy meets the minimum liability coverage required by the state. An SR-22 is a form that is ordered by the court or your state and is filled out by your insurance provider to prove that you meet the minimum requirements.
Avoid a lapse in car insurance
A lapse in car insurance comes with risk. Driving without insurance can result in fines, car impoundment, and potentially jail time. Plus, you will likely have to pay more for insurance in the future. To avoid these scenarios, always try to pay your monthly insurance premiums. If you forget to make a payment or fall into tough financial times, contact your insurer as soon as possible to see what your options are.