The main question you probably have about lapses in car insurance is what are they? How do they happen? What happens when they do? And, of course, how do you prevent them? A car insurance lapse or lapse in coverage (as it is sometimes referred to) is when your car insurance policy becomes inactive. This can be due to a number of reasons, but the effect is always the same -you’re no longer covered when behind the wheel. This 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 it 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 it.
Why Should Car Insurance be Maintained?
Simply put, it’s the law that car insurance must be maintained. Every state, except New Hampshire, has car insurance requirements in place that every driver needs to follow. Every driver should carry liability auto coverage -sometimes referred to as basic coverage. This insurance covers the medical costs of anyone you injure in a car accident and the damage to their vehicle. Additional auto insurance coverage like comprehensive and collision insurance can be purchased to cover your own repairs and 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 rates on time and driving safe in order to keep said rates low and affordable. Your state’s DMV is usually in the loop with your insurance provider and is constantly updated on your current auto insurance policy. If your insurance lapses, they will know.
What Does it Mean to Have Your Car Insurance Lapse?
Whenever your auto insurance policy expires or is canceled, it begins the period known as 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 insurance gets its name from. When you have a lapse in coverage, it means that you should waste no time in getting it reinstated with or without your previous auto insurer. After two days, you’ll notice that your rates weren’t as low as before. Driving without 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. It can be the result of:
- Missed payments - Missing your monthly payments more often than not will result in your insurance company canceling your policy. Simple business principle -you must pay to receive the service.
- Payments are late - Missing the deadline even if you make the payment 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 coverage.
- Policy is no longer in your budget - If you can’t afford your monthly premiums, even for the most minimum coverage available, your policy may lapse.
- Policy didn’t get renewed - Around every six months, you’ll have to contact your insurance company and renew your policy to continue receiving coverage. Foregoing this is another way to cause a lapse.
- Policy is canceled - After a series of traffic violations or even after a DUI, your insurance provider may cancel your coverage rather than just raise your premiums. The only thing you can do is find another provider within the week to avoid consequences.
How Much do Your Insurance Rates Increase After a Lapse?
An insurance lapse ties into your premiums because a potential provider looks at your insurance history. Continuous coverage is something that insurers both look for and expect most of the time. If they notice any gaps in a driver’s insurance history, the process has an added risk for insuring said driver. Based on how long that lapse is, they will charge you a higher premium.
To give you an idea of how much exactly, here is 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 insurance lapse don’t add much to the annual insurance rate. The hope is that you’ve already found a new insurance provider and policy by this time. Again, you should find new coverage within the same week your insurance has lapsed.
- 15 days after - After two weeks of being uninsured, you will be paying at least $250 per month more for an estimated total of $2,750 per year.
- 30 days after - Assuming you have a good driving history, a month of lapsed insurance shouldn’t increase your rates from what they already are. Still, upon seeing you have a whole month of no insurance, the insurer will charge you more than normal.
- 45 days after - The real increase happens between the 30 and 45-day mark. Say that your annual premium was $2,750 after one month of lapse; within those 15 days, it will increase to nearly $3,500. Since day one, your rates have increased a whole $1,000.
- 60 days after - At this point, an $1,000 rate increase is the very least you may face. You really should have car insurance by now unless you want to get it up to $4,500 after 15 more days and so on.
What if You Lease or Finance Your Car?
What happens when your insurance lapses on a leased car depend on what is written in the original loan terms. Some leasers expect drivers to have full coverage on their cars. In the event of an insurance lapse, a leased car will be repossessed, or a new plan can be bought with much higher insurance 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 lapses is:
- Pay rates on time - Always make your monthly auto insurance payments on time to continue receiving coverage. You may have the option to set up automatic payments.
- Be mindful when to renew - Keep the date where you would have to renew your auto policy with your insurer. This is another thing that can be automated, like your 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 premium you can afford - You should always be able to pay your rates every month. The best rates can be found by shopping around or seeking out discounts. Every insurer prices its policies differently, so you have plenty of options. Always make sure you are paying for at least your state’s minimum auto insurance requirement.
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 it. If not, then you’ll have to find a new policy. Shopping around the local and national names for different rates is certainly an option, but you should be mindful of the time you spend uninsured. Obtain quotes from different companies, and you’ll find that every one of them has its own way of judging gaps in coverage.
Above all, don’t drive 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 policy, but you also have to reinstate your license, which is its own can of worms. The best you can do is stay on top of your car insurance to prevent a lapse.
Keep yourself protected with affordable car insurance from Insurance Navy. We help drivers get low-cost auto insurance regardless of their risk. Call us today at 888-949-6289 for a free quote. You can also apply online via our website or mobile app.