Don't Let an Insurance Lapse Leave You Uncovered

Many factors are taken into consideration by insurance companies when they go through the process of determining your auto insurance rates. Some of these considerations include the make and model of your car, you age and gender, and your history of past claims. Another substantial factor is your auto insurance history. Providers look at whether you have had any lapses in coverage, and if you drove while you were uninsured.

What Is Meant by a Lapse in Coverage?

A lapse in coverage simply means that you have experienced a time when you did not have insurance coverage. There are multiple ways that this can occur:

  • Late premium payments
  • Policy cancellation by your provider
  • Closing of your provider's business
  • Choice to discontinue coverage because of lost license
  • Election to no longer drive or own a car, perhaps due to illness or extended time out of country

Can a Lapse Impact Future Premiums?

It is true that you can save money by not having to make insurance premium payments. Unfortunately, your savings from a lapse in coverage are short-term, unless you never plan to drive again.

Insurance companies inspect your auto insurance history as one way of determining your rate. You may be deemed a “high-risk driver" if you've allowed your coverage to lapse or if you drive or are in an accident during the lapse period.

After being classified “high-risk," any post-lapse policy you find will likely be considerably more expensive than if you had kept your former policy active.

If you have had a lapse, there is a chance that providers will not extend you coverage. If this is the case, then you would need to get insurance through your state's automobile insurance plan, which will be at a much higher cost.

Why is it Important to Drive With Insurance?

Nearly all states require drivers to have some form of auto insurance or a financial bond. This means that if you plan to drive after a lapse, you will need to purchase car insurance again.

If you are found to be driving during a lapse in coverage, you can expect a significant financial impact. In this situation, drivers can expect fines, fees for license suspension and reinstatement and perhaps jail time. There may also be the requirement to file an SR-22 proof of financial responsibility.

There are substantial costs associated with having an accident while uninsured. Without the appropriate coverage, you could end up owing thousands of dollars that you can't afford to pay. If this happens, you stand to lose valuable assets, such as your house.

How to Avoid a Lapse

Be sure to communicate with your insurance agent if your driving habits are going to change only on a temporary basis (e.g., travel). They should be able to provide some alternative solutions other than simply giving up your coverage.

Check with your state to see if they have provisions for low-cost insurance; if available, it may be an answer to avoid a gap in coverage. Alternately, if your state allows it, consider placing a bond. The money only gets used if you happen to have an accident, but if you are not driving, you cannot have an accident.

Return to the Land of the Insured

Following a lapse in car insurance coverage, contact with your insurance agent or company should be made immediately. Many companies do have provisions for a grace period. If you merely overlooked paying your premium, you may not experience any repercussions. Note that most grace periods are only extended for 25 or less. A lapse beyond the grace period will result in cancellation of your policy. Your gap may also be forgiven if you were insured by an employer or if you were in active military service.

Several states have systems in place to verify drivers that have up-to-date insurance allowing them the information to impose fines on the drivers who don't.

Contingent upon the reason for your gap in coverage, you may have to deal with higher premiums for six months or so after reinstatement. Take into account that this may be considerably longer if you were found driving or in an accident while uninsured.

By maintaining a clean driving record and not permitting your car insurance to lapse again, your rates ought to return to normal fairly quickly.