What happens if I let my car insurance policy lapse?

At least liability car insurance is required in most parts of the United States. If a police officer pulls you over and you don’t have valid proof of insurance, you could receive a hefty fine, a suspended driver’s license, or even jail time.

The average cost of car insurance in the U.S. is $147, and people who have let their policies lapse often have to pay even more.

What happens if you let your car insurance policy lapse? Read on for more information about the consequences of letting your car insurance policy lapse and what to do if it happens.

What happens if I let my car insurance policy lapse?

The consequences of letting your insurance policy lapse can be serious. So let’s look at a few potential outcomes.

Not Having Insurance

Car insurance requirements vary depending on the state, and you could face fines, license suspension, and even jail time for driving uninsured. If you don’t have insurance and have an accident with another driver, you could be responsible for all the repairs and medical expenses.

The other person could file a lawsuit, and in some states, they can get compensation for emotional pain and physical or mechanical damages. Defending yourself from a lawsuit can be a long, stressful experience.

If you know the other person, staying on good terms with them while arguing in court can be tough. Using insurance coverage can be much quicker and easier.

A Rate Increase

Even one day without car coverage can raise your insurance rates with some companies in some states. In other states, there’s a 10–20 day grace period before a company cancels a policy. This allows people to catch up if they’re behind on payments.

When possible, search for the best collision coverage car insurance companies and start new insurance policies before you cancel old ones. That way, you can avoid any lapses and ensure continuous coverage.

Repossession

Many banks and car dealers require full coverage car insurance for people with a loan or lease. This protects the lender from losses after an accident. However, if you let your insurance lapse, your car could be repossessed.

With some financial institutions, you may not have any warning that your vehicle will be repossessed. This can make finding out what happened to your vehicle and getting a new one difficult. A repossession can also harm your credit score.

Read more: How often should I review and update my car insurance coverage?

What should I do if my car insurance policy lapses?

If you realize that your policy has lapsed, call your insurance company as soon as possible. You may be able to get your policy reinstated quickly if it’s not canceled. If your car insurance is already canceled, start new insurance at the same or another company.

Remember that, with many organizations, you can get a discount for keeping the same policy for a long period. However, if you have to start a new policy, you’ll lose that discount, and you could have to pay higher rates.

Read More:

• What is the process for renewing my car insurance policy?
• Will your Car Insurance be cancelled after an accident?

Things to Remember About a Lapse in Your Car Insurance Coverage

If you’re at fault in an accident while uninsured, you may have to pay for your own expenses and the costs of the person you collided with. A lapse in your car insurance coverage could raise your rates as well.

Compare car insurance options carefully to choose a policy that allows reinstatement after a short lapse. That way, you can keep your rates low.

Case Studies: The Consequences of Allowing Your Car Insurance Policy to Lapse

Case Study 1: Financial Consequences

John is a car owner who let his car insurance policy lapse unintentionally. Due to financial constraints, he decided to delay renewing his policy.

In most jurisdictions, driving without insurance is illegal. If John gets caught without valid insurance coverage, he may face legal consequences, including fines, license suspension, or even imprisonment, depending on the severity of the offense.

Case Study 2: Loss of Vehicle Protection

Sarah, an occasional driver, accidentally allows her car insurance policy to lapse while she is away on vacation.

If Sarah’s car is involved in an accident or sustains damage due to theft, vandalism, or natural disasters during the period of lapsed coverage, she won’t receive any financial compensation from the insurance company. She will be responsible for covering all the repair or replacement costs out of pocket.

Case Study 3: Negative Impact on Insurance History

Mark, a new driver, lets his car insurance policy lapse due to lack of awareness about the renewal process.

Continuous coverage is considered a positive factor in determining insurance premiums. When Mark allows his policy to lapse, it creates a gap in his insurance history. This gap can result in higher premiums when he eventually obtains coverage again, as insurance providers may view him as a higher-risk driver.

It is essential to maintain continuous car insurance coverage to protect oneself from legal, financial, and personal risks associated with a lapsed policy.