Consequences Of A Lapse In Insurance


Consequences Of A Lapse In Insurance

Policy Scout
Policy Scout

It can happen to even the most responsible driver: Your automobile insurance lapses. It could be as simple as missing a payment, or perhaps you aren't expecting to drive your vehicle for a while. Whatever the reason, even if it's a good one, you'll soon discover that going without insurance can result in a big headache. Still, you may still be able to recover from a lapse without too much financial woes. Read on:

The First Question: Why?

There are plenty of excuses that automobile insurance companies hear for lapsed coverage, and some are worse than others. If you've been uninsured for more than a month or two, you're likely going to look like a great risk. There are a couple exceptions:

  • Military personnel: If you've been deployed or are training on base, chances are your lapse won't be much of a problem. 

  • New drivers: If young drivers aren't planning to be a listed name on their parents' policy, they won't be penalized – but they'll still likely have a challenging time finding a policy with a premium carrier. 

If you don't fit into either of those categories, you'll be facing significant scrutiny when you are ready to reinstate your policy. If you are not covered because you forgot to pay your bill or because you simply didn't have the funds to cover it, insurers will presume that you have been driving without insurance. And if this is indeed the case, you're putting yourself at risk in an accident. You'll be held personally liable and face heavy fines by law enforcement. 

It's Only Been a Few Days …

If your lapse has only been a few days, call your insurance company immediately. They may be willing to reinstate your policy. This is true especially if you haven't filed multiple claims against your policy, have a good driving record and don't have a history of being late with payments.

However, if you've been in an accident during the time that you haven't had insurance, you will likely be completely responsible for any damage or injury you've caused. However, if you are in an accident that is not your fault and the other driver is insured, you can still move forward with collecting what is owed to you.

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Sometimes, insurance companies will allow you to reinstate lapsed policies if you are able to make all the payments that are owed – as well as a reinstatement fee. However, every company has a different policy. You may have to apply for a completely new policy (usually at a higher rate). Some companies simply refuse to insure any drivers with a lapse period in their history, especially if the lapse is because they canceled your policy due to non-payment.

Avoiding a Lapse

Let's say your only car is in the shop after an accident or it broke down. Maybe you sold your only car and don't plan on driving. If you still have insurance, that's good! You can save yourself money and worries in the future by planning ahead. First, call your insurance company and explain the situation. Perhaps there is a way that they can offer you a reduced rate during this time. 

Another option is to see if you can be a listed driver on the policy of a family member or a friend. If you can show that you're listed on another policy even when you're not driving, you won't be considered a high-risk driver when you are ready to get your own insurance.

It's Been a While, Now What?

If you haven't had insurance for weeks or longer – and you aren't covered with one of the exceptions – you're likely looking at a significantly higher bill than you may expect. It's going to be more difficult to get an affordable rate. In fact, you may have to turn to a company that specializes in high-risk drivers. 

You'll also want to check with your state's Department of Motor Vehicles. Some states require that insurance companies send notification in the result of lapsed insurance policies. This may mean that your license is suspended or you owe a fine. Some states will also require that you carry what is known as an SR22 insurance plan for several years as part of your new policy. This is yet another added expense or hurdle to getting approved by premium insurance companies.

Tips to Reducing Costs

It will take some time to get out of the high-risk tier of insurance companies, but it's possible if you pay your premiums on time and maintain a good driving record. When it's time to get your insurance in order, make sure you get multiple quotes. Some companies may be more forgiving than others.

Another way that you can reduce the payment in the meantime is to purchase a used car that doesn't require collision coverage. If you are a homeowner, see if you can bundle your car insurance with your home insurance. Some companies will also offer discounts if you sign up for automatic payments or have low mileage.

Once you've reinstated your policy, you'll want to make sure that you create a budget to pay your bills on time. It makes more sense to cut the cable or cook food at home than not pay your insurance bill and be considered a high-risk driver that must pay extra for coverage.

Finally, when you don't have insurance, definitely do not drive. You'll run the risk of having to pay substantially, both financially and possibly with legal penalties or even jail time. Every state, except for New Hampshire, requires some kind of insurance coverage for every driver. You'll save yourself a lot of trouble by following the law, whatever the reason for your lapse in auto insurance. 


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