In almost every state, car insurance is a non-negotiable requirement. It is extremely important to protect yourself by keeping at least the state minimum liability car insurance on your vehicles up to fault.
If you let your insurance lapse, the consequences can be severe.
Car insurance cut-off explained
Car insurance lapse is a period of time during which your vehicle is not covered by active car insurance. You may find yourself without auto insurance coverage because:
You haven’t paid your car insurance premium.
Your insurance company has canceled your policy.
You haven’t renewed your car insurance.
Your car insurance policy has expired.
You changed car insurance companies and there was a gap between when your old policy ended and when the new policy started.
Most insurers offer a grace period for car insurance to expire. So you usually don’t have to worry about your insurance company canceling your policy if you miss your payment by a day or two.
The grace period in most countries varies between 10 and 20 days. If your insurance company intends to cancel your policy (due to non-payment or any other reason), they must notify you by post or email before doing so.
Consequences of expiry of the insurance
A gap in coverage can lead to serious problems, starting with the fact that it will be illegal to drive in most states. If you’re caught driving without auto insurance, the legal and financial consequences vary by state law, but can include:
Ticket and fine
Driving license suspension
Termination of motor vehicle registration
Towing your vehicle to a parking lot
SR-22 Insurance Requirement
Jail in certain states
It’s also important to note that if you let your insurance policy lapse, finding affordable coverage again in the future can be difficult. When shopping for a new insurance policy, you will likely be classified as a high-risk driver and be quoted higher rates than you have paid in the past due to the difference in coverage.
If you’re caught driving without insurance, your state may require you to file an SR-22 form, also known as a Certificate of Financial Responsibility. This form proves that you have auto insurance that meets your state’s minimum requirements. If you have to file an SR-22 form, you will likely see a large increase in your insurance rate and may have a hard time finding coverage from traditional auto insurance providers in your area.
Of course, the biggest risk of driving without insurance occurs if you get into a car accident while uninsured. If you cause an accident while driving without insurance, you may be responsible for paying the other parties’ medical expenses, repair and replacement costs, legal fees, and more.
What to do if your car policy expires
If you find yourself in the troubling situation of not having car insurance, it’s best to make a plan to resolve the issue as quickly as possible.
Here’s what to do if your car insurance lapses:
Understand your recovery options and requirements. Talk to your insurance company about how to get your car insurance back. If you’re still in the grace period, pay off your policy as quickly as possible.
Pay premiums and fees due to reinstate coverage. Pay all delinquent insurance premiums, late fees and any other necessary fees to restore your coverage as soon as possible. If too much time has passed, you may need to start a new policy or switch insurance providers.
Find out the impact on future insurance premiums. If your auto insurance company is unable to reinstate your existing policy, you may face higher insurance premiums for the foreseeable future. Shop around for auto insurance quotes to get the best rates you can find.
Talk to professionals. Don’t be afraid to turn to insurance agents for advice. If you are facing SR-22 requirements, higher premiums, or other complications, seeking guidance from an insurance professional can be especially important.
Read more: Are you shocked by the spike in car insurance rates? Here are 9 ways to save money
How to avoid auto insurance lapses
The consequences of a car insurance lapse can be severe. Here are some simple tips to help you avoid any unplanned gaps in your coverage.
1. Set up automatic payments
Most insurance companies will allow you to schedule automatic drafts for your monthly premiums. Some may even offer you a discount on your car insurance if you allow an automatic electronic funds transfer (EFT) from your bank account each month. And if you can afford to prepay your premium for 12 months or even six months at a time, you may qualify for even bigger discounts with some insurance providers.
2. Communicate with your insurance provider
It’s important to stay in touch with your auto insurance company, especially when there are changes in your coverage needs. For example, if you decide to sell your car, you should not stop making payments on your existing car insurance policy without first contacting your insurance company. Otherwise, your insurer may cancel your policy and you could find yourself in a higher risk category the next time you shop for auto insurance coverage.
Likewise, it’s important to be careful when switching car insurance companies. You don’t want to cancel your old car insurance too soon in this situation. While it’s smart to shop around for more affordable auto insurance rates, it’s critical to make sure your new insurance policy is in effect before you cancel your existing policy to avoid gaps in coverage.
Maintaining coverage without owning a car
If you’re between vehicles, a non-owner policy can be a good short-term solution to help you avoid an insurance lapse. This type of policy can help keep your insurance rates lower over time by ensuring that there are no gaps in your insurance coverage. But it’s important to understand that non-owner insurance has limitations.
Non-owner insurance does not cover damage to vehicles you rent or borrow. It covers injuries to others and property damage that may occur when you drive a vehicle you don’t own. However, if you live with the owner of the car you will be driving, you will need to be added to that person’s insurance policy.
A personal comprehensive insurance policy can also provide you with additional liability protection when your other car insurance coverage is not enough. Likewise, you could consider purchasing rental car insurance to give you extra protection when you rent a vehicle.
As with any type of insurance, it’s important to do your research. You should review the benefits of each option and see if they are worth the cost.