In every state but New Hampshire, it’s illegal to own or operate an uninsured vehicle. But what happens if there’s a lapse in your insurance coverage?
Legally: an insurance lapse is any period of time when a registered vehicle does not have at least the state-required minimum insurance coverage. It can result from not paying your premiums, not renewing a policy once it’s ended, or getting dropped by your insurer after causing too many accidents or incurring too many tickets.
Mistakes happen, but you must avoid lapses in your car insurance at all costs. If you drive without car insurance, you’ll invariably be caught and penalized in a variety of ways. No matter who your insurance provider is, how the lapse happened, or whether it was intentional or accidental – insurance companies take it as a sign that you’re lousy clientele. Moreover, driving without insurance can lead to fines, tickets, license suspension, and even jail time for repeat offenders.
Maybe you’re currently wondering if it’s worth it to risk a lapse in coverage. Perhaps you’ve already lapsed, or there’s an existing coverage gap in your insurance history. But no matter what your financial situation is: it’s better to keep or downgrade existing coverage than to cancel altogether. The money you’d save in the short term pales in comparison to the inevitable future increase of your premium. Insurance companies share databases, and they will catch on if you go without coverage. Even if you don’t drive the car during that lapse, the financial consequences remain equally disastrous.
At the very least: getting caught means an insurance lapse fine of up to $5,000, permanent marks on your driving record, and a permanently-higher future cost of insurance.
Given the severity of these consequences: it’s best practice – and not terribly difficult – to avoid coverage lapses in the first place. Drive safely to avoid the worst-case scenario of being dropped by your insurer altogether. After that, get an insurance rate you know you can maintain. Pay your insurance premiums on time, and consider setting up auto-billing. Remember to renew the policy every year and always carry at least the state minimum required insurance.
But if you do miss a payment or fail to renew the policy: don’t worry. Federal law requires insurance companies to offer a grace period and send multiple written notices about the temporary lapse. Typically lasting between 10 and 30 days, depending on the state and insurance company in question; grace periods are final notice—your last chance to patch things up before getting hit with penalties. If you don’t pay by the end of the grace period, you could lose your policy – leaving you uninsured, lapsed, and disqualified from the low rate you used to enjoy.
If your vehicle is leased or financed, there’s an extra layer, here.
States require liability insurance, at minimum. If you’re involved in a traffic accident, there needs to be some entity that can cover any injuries or damage you caused. However, your vehicle is not itself protected by liability insurance. If the car is financed, the loan holder almost always requires the driver to carry more than the state minimum liability insurance. That typically looks like a bundle of liability, collision, and comprehensive coverage riders. But if you allow that insurance policy to lapse? Your creditors will likely purchase a new insurance policy for you, at a much higher rate. Or worse, repossess your car altogether.
If your lapse was brief and understandable – due to a missed payment, lost mail, or incomplete renewal – speak with an agent before accepting the consequences. Your auto insurer might be willing to reinstate the original policy once you pay in full. They’ll likely charge a one-time lapse fee, but the rate could remain the same, and that’s what truly matters.
However, if your lapse was longer than a few weeks – it’s going to be permanently harder to get reinsured. Check your policy details, stay on top of payments, and don’t cancel your auto insurance for short-term savings!
