The main question you probably have about lapses in car insurance is what are they? How do car insurance lapses happen? What happens when there is a lapse in insurance coverage? And, of course, how do you prevent car insurance lapses?
What is a lapse in car insurance?
A car insurance lapse or lapse in auto insurance coverage, as it is sometimes referred to, is when your car insurance policy becomes inactive and you lose continuous coverage.
Your car insurance policy can become inactive due to a number of reasons, but when a policy lapses the effect is always the same -you’re no longer covered by your current insurance when behind the wheel of your vehicle with unpleasant consequences, especially if you get involved in a car accident. A lapse in coverage can be either knowingly or unknowingly on the driver’s part.
Driving without car insurance can carry a series of penalties that can impact you and cost you a lot in fines.
The good news is that car insurance lapses can be resolved quickly and easily before the consequences get too dire. Consider this your all-purpose guide to a lapse in car insurance and how to handle a lapse of insurance.
Why Should Car Insurance Policy be Maintained?
Simply put, it’s the law that car insurance must be maintained for every vehicle. Every state, except New Hampshire, has car insurance requirements in place that every driver needs to follow while behind the wheel of their motor vehicle.
Every driver should carry liability auto coverage -sometimes referred to as basic car insurance coverage. The liability insurance coverage covers the medical costs of anyone you injure in a car accident and the damage to their vehicle, or property damage.
Additional auto insurance coverage like comprehensive and collision insurance can be purchased to cover your own vehicle repairs and personal injuries in what is referred to as full coverage car insurance.
Full auto insurance isn’t required by law and, naturally, is the more expensive, complex option. Car insurance is largely maintained by paying your monthly premium rates on time and driving safe in order to keep said car insurance premium rates low and affordable.
Your state’s DMV is usually in the loop with your car insurance provider and is constantly updated on your current auto insurance policy. If your auto insurance lapses, they will know, and you may be subject to a license or registration suspension that could lead to you having to surrender your vehicle registration.
What Does it Mean to Have Your Car Insurance Lapsed?
Whenever your auto insurance policy expires or is canceled, it begins the period known as auto insurance lapse. Your auto insurance is kept as a record, and a period of being uninsured shows up as a gap in it. That’s actually where gap car insurance gets its name from.
When you have a lapse in your car insurance coverage, it means that you should waste no time in getting your car insurance reinstated with or without your previous auto insurer.
After two days, you’ll notice that your auto insurance rates weren’t as low as before.
Driving without auto insurance can also get you in trouble with the police if you are pulled over for something as simple as running a stop sign.
What Causes Lapses in Car Insurance?
There are a couple of things that can nullify your auto insurance policy and coverage.
Car insurance lapses can be the result of:
- Missed auto insurance payments - Missing your monthly auto insurance premium payments more often than not will result in your insurance company canceling your auto insurance policy. Simple business principle -you must pay to receive the service.
- Car insurance payments are late - Missing the deadline even if you make the payment for your auto insurance policy later on, can look bad if it is a regular habit. Insurers will take notice when this occurs only once. If it happens again, they may opt to cancel your car insurance coverage.
- Car insurance policy no longer in your budget - If you can’t afford your monthly premiums, even for the most minimum auto insurance coverage available, your car insurance policy may lapse.
- Auto insurance policy didn’t get renewed - Around every six months, you’ll have to contact your insurance company and renew your car insurance policy to continue receiving vehicle insurance coverage and to keep evidence of insurance. Foregoing this is another way to cause a lapse in your auto insurance.
- Car insurance policy canceled - After a series of traffic violations or even after a DUI, your insurance provider may cancel your car insurance coverage rather than just raise your auto insurance premiums. The only thing you can do is find another car insurance company within the week to avoid the consequences of car insurance lapses.
How Much Do Your Car Insurance Rates Increase After a Lapse?
A car insurance lapse ties into your auto insurance premiums because a potential car insurer looks at your auto insurance history. Continuous car insurance coverage is something that car insurers both look for and expect most of the time.
If insurers notice any gaps in a driver’s car insurance history, the process has an added risk for insuring said the now considered high-risk driver and their vehicle. Based on how long that car insurance lapse is, insurance companies will charge you a higher car insurance premium.
Here are the days of a policy lapse and how much it affects a car insurance annual rate of $2,500:
- First couple of days - The first couple of days of car insurance lapse don’t add much to the annual car insurance rate. The hope is that you’ve already found a new insurance provider and car insurance policy by this time. Again, you should find new car insurance coverage within the same week your car insurance has lapsed. Some car insurers may offer a brief grace period for missing payment, but this is not set in stone and varies depending on insurer and state.
- 15 days after - After a two-week period of time of being uninsured, you will be paying at least $250 per month more for an estimated total of $2,750 car insurance per year.
- 30 days after - Assuming you have a good driving history, a month of lapsed car insurance shouldn’t increase your car insurance rates from what they already are. Still, upon seeing you have a whole month of no car insurance, the insurer will charge you more than normal for your car insurance premium.
- 45 days after - The real increase in your car insurance premium happens between the 30 and 45-day mark. Say that your annual car insurance premium was $2,750 after one month of lapse; within those 15 days, your car insurance premium will increase to nearly $3,500. Since day one, your car insurance premium rates have increased a whole $1,000.
- 60 days after - At this point, an $1,000 auto insurance premium rate increase is the very least you may face. You really should have car insurance by now unless you want to get your car insurance premium up to $4,500 after 15 more days and so on.
What if You Lease or Finance Your Car?
What happens when your car insurance lapses on a leased car depend on what is written in the original vehicle loan terms.
Some vehicle leasers expect drivers to have full auto insurance coverage on their cars. In the event of an auto insurance lapse, a leased car will be repossessed, or a new car insurance plan can be bought with much higher car insurance premium rates.
How do You Avoid a Lapse in Auto Insurance?
The good news is that lapses in car insurance are preventable. All it takes is awareness and communication with your insurance provider.
What you can do personally to avoid car insurance lapses is:
- Pay auto insurance rates on time - Always make your monthly auto insurance premium payments on time to continue receiving car insurance coverage. You may have the option to set up automatic payments for your car insurance premium rates.
- Be mindful of when to renew - Keep the date where you would have to renew your auto insurance policy with your insurer. This is another thing that can be automated, like your car insurance premium payments, so you can always rest assured it gets done.
- Drive safely - Insurance companies watch your driving record like a hawk and may be more lenient towards safer drivers if something were to happen.
- Find a car insurance premium you can afford - You should always be able to pay your car insurance premium rates every month. The best auto insurance rates can be found by shopping around or seeking out discounts. Every insurer prices its vehicle insurance policies differently, so you have plenty of options. Always make sure you are paying for at least your state’s minimum auto insurance requirement no matter the insurance carriers.
What do You do When Your Coverage Lapses?
When faced with an auto insurance lapse, you should reach out to your insurance provider at once to see if they can reinstate your car insurance policy. If not, then you’ll have to find a new car insurance policy and maybe a new insurer.
Shopping around the local and national car insurance carriers for different auto insurance premium rates is certainly an option, but you should be mindful of the time you spend with your vehicle uninsured.
Obtain car insurance quotes from different auto insurance companies, and you’ll find that every car insurer has its own way of judging gaps in auto insurance coverage, so find the insurance company with the most affordable rate.
Above all, don’t drive your vehicle without insurance. There aren’t just insurance consequences but also several legal ones. You may face extensive fines, license suspension, and even jail time. Your car may also be impounded. Then you not only have to get a new auto insurance policy, but you also have to reinstate your drivers license, which is its own can of worms. The best you can do is stay on top of your car insurance policy to prevent a lapse.
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