Does a lapse in coverage affect your car insurance rates?

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A lapse in car insurance coverage can happen to anyone, but it’s something that should be handled immediately if it does. Driving without car insurance in most states is illegal, and you could find yourself at risk of paying costs out of pocket if you are in an accident.

If your insurance coverage lapses, your insurer will see you as a risk-taker and may not want to reinstate your policy. In that case, you would have to shop around for a new policy.

What is a lapse in insurance?

A lapse in insurance coverage happens when you neglect to pay your premiums, when your insurer cancels your policy or when you are switching between two policies and there’s a gap before your new policy starts. It may only be a day or so, or it might be 30 or 60 days or more.

A lapse in coverage can also happen for legitimate reasons: for example, if you are studying overseas and aren’t driving, or if you are deployed in the military. In cases such as these, you can often work with your insurer to suspend your policy or cut your coverage back significantly so that it does not lapse.

You should avoid a lapse at all costs, no matter how short it is. You are at great risk if you are in an accident while you have no coverage. You may also incur fines or other penalties, such as the suspension of your driver’s license or increased expenses from your lienholder if your insurance coverage lapses.

If you do not own a car, you may think that you do not need insurance, but if you drive at all, you should investigate non-owner car insurance to protect you for those times you are behind the wheel. This inexpensive option is available from most major insurers and can help you avoid a lapse — for example, if you sell one car and want to take your time finding a new one.

How a lapse in coverage affects car insurance rates

Another big reason for avoiding a lapse is because of its impact on your car insurance rates. If there is a gap in your coverage, your insurer will look at you as a higher-risk driver who’s willing to take chances — and that will cost you.

Your rates may go up anywhere from 10-30% if you have a lapse in coverage. It’s also possible your insurer may decline to reissue you coverage after a lapse, leaving you with no choice but to find a new policy. Since your insurer is required to report your lapse to your state’s DMV, any new insurer will know about it and charge you accordingly.

What to do if you have a lapse in coverage

The first thing to know about having a lapse is that you should deal with it immediately. Not next week, not when your next paycheck comes in — now. You should not get behind the wheel while your policy is lapsed for any reason.

Once you realize your policy has lapsed, take the following steps:

  • Call your insurance agent. If the lapse was only for a few days because you forgot to pay your premium, you might be able to pay it over the phone and have your policy reinstated immediately.
  • Many insurers include a grace period of up to 30 days for policyholders, so ask if this is an option.
  • If you are not successful in reinstating your policy, begin a search for new insurance immediately.
  • Again, do not drive while you are uninsured. This may cause you some hassles for you, but it is not worth the risk.

How to prevent a lapse in car insurance coverage

Deal with expected lapses when you know about them. If you plan to be out of the country for a time and don’t need insurance, for example, call your company. If your car is going to be in storage, you may be able to switch to a simple policy with just comprehensive coverage while you’re away.

To avoid unexpected lapses, set up a system to remind yourself when your premium is due. Whatever process works for you as a reminder is fine. If you are switching from one policy to another, double-check to be sure that there’s no time unaccounted for between the ending of the old policy and beginning of the new one.

If you expect to no longer be driving, contact your insurance company to cancel your policy. Also, call your DMV to find out if there are any state requirements, such as handing in your license. Many states allow you to retain your license as a means of identification; others offer non-drivers licenses that can be used in the same way.

Making it easier to pay premiums

If you are struggling financially and finding it difficult to pay your insurance premiums, don’t despair. Here are a few ways to decrease those prices and make your coverage more affordable:

  • Shop around for the best quotes. You may be surprised at the differences from one insurance carrier to another.
  • Consider lowering your policy limits. Each state has a minimum liability requirement, but if you’re paying for more coverage than that, you can decrease your limits, and your premiums should go down. Just understand that there is an additional risk when lowering your coverage.
  • Look for discounts. Most major insurers offer a handful of discounts, and some are easy to earn. For example, look for discounts for paying online or setting your payments up on a recurring schedule. These discounts may significantly reduce your premium.
  • If you are carrying collision and comprehensive coverage but your car is older and may not be worth fixing following an accident, consider dropping this type of coverage, which is not mandatory in any state.

Frequently asked questions

What is the best auto insurance company?

There’s no one company that’s perfect for everyone. To find the best auto insurance for your own circumstances, a good place to start is our list of the Best Auto Insurance Companies of 2020. All our choices offer a range of coverage options at competitive pricing, and all have a reputation for excellent customer service.

Will even a short lapse cause my premiums to increase?

It may — it depends on your insurer and the reason for the lapse. You’ll get the best results if you handle the situation immediately, so your insurer can see that you’re making a good-faith effort to rectify the situation.

What happens if my insurer won’t reinstate my policy?

If that happens, you will want to search for a new policy quickly. Insurance lapses get reported to the DMV, so any insurer you query may know about your lapse. Shopping around and getting multiple quotes is the best way to find a competitive rate.