Car Insurance Lapse

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Margaret Huntley 04-08-2021

What You Need to Know About Car Insurance Lapse?

Car Insurance Lapse - ConsumerCoverage

When you have a registered vehicle, but do not have insurance for a period of time, that period of time is called a “lapse.” A lapse in coverage may be caused by a number of reasons:

  • Cancelled policy due to not paying your premiums on time 
  • Not renewing your insurance policy 
  • Being dropped by your insurance provider for having too many tickets and/or accidents 
  • Voluntary cancellation of policy 

Regardless of whether your lapse was intentional or accidental, there are significant financial consequences. After a lapse of less than 30 days, you can expect to see your rates increase by 8%. If the lapse lasts longer, the increase could reach 35%. 

The reason for these increases is due to the high risk nature of insurance lapses. All of the reasons for a lapse are seen as high risk behaviours. For example, not paying premiums on time makes you appear less reliable. Even voluntary lapses where you do not drive your vehicle at all, mean that you have less practise driving. 

For the same reasons, it may be harder to purchase new coverage after a lapse as some companies will not want to insure you. 

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Car Insurance Lapse Grace Period

You may be getting worried while reading about the consequences of insurance lapses. But there is a grace period for missed payments. Your insurance provider is legally required to give you a notice before they drop your coverage. 

The grace period will typically last between 10 and 20 days depending on your provider. As long as you make the payments within this period, your policy will not lapse.  

What to Do if Your Insurance Lapses?

Car insurance lapses are not the end of the road. There are steps you can take to get back on track. 

  • Do Not Drive: It is illegal to drive without insurance in all states except New Hampshire. Driving without insurance can lead to fines of up to $5000 and in some cases jail time. If you are caught, it goes on your driving record which will increase insurance rates even more than regular lapses do. 
  • Call Your Current Insurer: Your current insurer may be inclined to reinstate your policy with minimal consequences if you call them shortly after the lapse occurs. 
  • Shop Around for the Best Rates: There is a chance that your insurer will not reinstate your previous policy. Or perhaps you cannot afford that previous policy, which is why you had to lapse. In this case, shop around at different providers to see what the best deal is for a new policy. 

Your priority during a car insurance lapse is to get your coverage back as soon as possible to avoid further fees. 

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How to Avoid a Lapse in Coverage?

There are plenty of ways to avoid insurance lapses:

  • Purchase an Insurance Rate you Can Maintain: Never buy an insurance policy that is not sustainable for you. Understand your finances, and research your insurance policy to know what you can afford in the long term. Consult financial and insurance experts for help if you require it. An informed decision is the best decision! 
  • Pay Your Bills on Time: This is a simple measure that will ensure that you do not accidently lapse your car insurance. If you need to, set reminders on your phone or calendar to remind yourself when it is time to pay your bills. 
  • Drive Safely: Safe driving is always recommended. Not only does this keep your rates at a minimum cost, but it also ensures that you are not dropped by your provider for having too many tickets or accidents. Not to mention driving safely protects yourself and others on the road. 
  • Carry State’s Minimum Insurance: If you are going through a period where you cannot afford your current policy, it is worthwhile to reduce your coverage instead of dropping it all together. Most states have a minimum requirement for drivers to be insured for liability, collision, and comprehensive coverages. Look into what the minimum requirements are in your home state, and ask your insurance provider about that policy. 
  • Consider an Insurance Suspension: Instead of a lapse, your insurance provider may permit a suspension of your insurance in special circumstances. If you are deployed overseas, or studying abroad, certain providers will suspend your coverage until you are back without consequences. 

 If you put in the research and the work, you can ensure that you receive the best insurance coverage possible. Reading this blog is a great first step in making informed choices regarding your insurance. 

Margaret HuntleyMargaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.