Q

Car insurance lapse: What does it mean?

A

A lapse in coverage is any period of time that your registered car is not covered by car insurance. You could lapse in coverage if your policy is canceled, your policy ended, or you switched insurance companies while in between policy periods.

Kara McGinley

Kara McGinley

Published May 5, 2020

KEY TAKEAWAYS

  • You can have a lapse in coverage if your policy is canceled, if you do not renew or reinstate your policy, or if you switch auto insurance companies with any time between policy periods

  • A lapse in coverage could result in fines, higher insurance rates in the future, and even the repossession of your car if you lease or finance it

  • You should try to reinstate your auto policy within your insurance company’s cancelation grace period. If you cannot, you should buy a new one

  • To avoid a lapse in coverage, pay your premiums on time and be mindful of the terms of your car insurance policy

Car insurance is essential financial protection for drivers. A car insurance policy will cover you if you get into a car accident and injure someone with your vehicle or damage their car. It can also cover your car from damages caused by car accidents and other perils, like lightning strikes, theft, vandalism and animal infestations.

In order for your policy to remain active, you need to pay your car insurance premium either monthly, bi-annually, or annually. If you do not pay your car insurance, your policy will eventually lapse. If you lapse in coverage, you will no longer be protected.

All but two states require drivers to have a car insurance policy in order to legally drive, so driving while you have a lapse in coverage could result in expensive fines and bills if you get into an accident.

In this article:

What happens if I lapse in car insurance coverage?

A lapse in coverage is a period of time that you do not have car insurance coverage for your car. There are a few common ways you can lapse in coverage:

  • Your policy is canceled by your insurer
  • You do not reinstate or renew your policy
  • You switch insurance companies and your new policy does not start on the same day that your previous policy ended, so you go uninsured for a few days, weeks, or months

Short lapses in coverage are not the end of the world and it is usually fairly easy to reinstate your policy. However, if you do not reinstate your policy or buy a new one, your insurance company will fully cancel your policy and you will lapse in coverage.

A lapse in coverage could result in a few different consequences.

  • You will be uninsured: This might be obvious, but you will no longer have car insurance coverage once your policy lapses. In almost all states, this means you will not be legally allowed to drive on public roads. If you get caught driving without car insurance, depending on what state you live in, you could be fined or your license could get suspended. If you get into an accident while uninsured you will be stuck paying for repairs or injuries out of pocket.

  • Increase in future car insurance rates: If you have a lapse in coverage, it will stay on your insurance record, which insurance companies consider when calculating your insurance rates. Insurance companies factor-in your driving and insurance history to determine how at-risk of a driver you could be, and lapsing in coverage will raise your risk profile. Some insurance companies may refuse to insure you if you have multiple lapses in coverage.

  • Repossession of your vehicle: If you lease or finance your car, your vehicle could be repossessed by your leasing or lending company. Most lenders require you to have a full coverage car insurance policy during your leasing period.

  • Impact on your driving record: Some states require insurance companies to notify the DMV when someone lapses in coverage. Once you have a lapse in coverage, it may be noted on your driving record, which could result in fines depending on what state you live in.

policygeniusSymbolCenter

Home & Auto Insurance Comparison Made Easy

People save 20% on average by bundling homeowners & auto insurance.

What to do if your car insurance lapses

The good news is your insurance company is required by law to contact you before they cancel your policy. Even better — most insurance companies will give you a 20 to 30 day grace period to catch up on the premium payments that you owe before they fully cancel your policy and you lapse in coverage.

What you should do if you receive a cancellation notice from your insurance company:

  • Contact your insurance company: Once you receive your notice, you should contact your car insurance company to learn the details of the potential cancelation. Insurance companies can cancel your policy for a variety of reasons, like for nonpayment, unsafe driving, or if you’ve broken any terms of your policy.
  • Try to reinstate your policy: Most of the time, you can easily reinstate your policy within your cancelation grace period. You usually have to pay the premiums you owe and potentially a reinstatement fee.
  • Buy a new policy if you can’t reinstate your current one: Shopping for a new car insurance policy might be more expensive, but you’ll want to get one right away so that you don’t lapse in coverage before your grace period is over. This can either be with your current insurance company or a new one, as long as it’s before the grace period ends.
  • Do not drive uninsured: Like we mentioned, in nearly all states this is illegal to drive your car uninsured and can result in penalties, as well as footing the bill if you get into an accident.

If you can no longer afford your car insurance coverage, you should shop around and get quotes from different insurance companies. Many insurers offer discounts if you switch your car insurance.

Learn more about how to lower your car insurance rates.

How to avoid a car insurance lapse

The best way to avoid a lapse in car insurance is to make your payments on time. If you receive a cancelation notice, you should contact your insurance company right away to get your policy reinstated.

Below are few other tips to avoid a lapse in coverage:

  • Pay attention to the term dates of your policy, it’s easier than you think to simply forget to renew your policy.
  • When switching car insurance policies, make sure your new policy starts the same day as your old policy ends. Even one day between policies can result in a lapse in coverage.
  • If you can no longer afford your car insurance premiums, instead of letting your policy lapse you should shop around and get quotes from other insurance companies. A high rate at one insurance company does not necessarily mean a high rate at a different company. You should also talk to your insurance company about reworking your policy, you might be paying for more coverage than you need.
  • If you put your car in long term storage, talk to your insurance company about reducing your coverage to comprehensive coverage only instead of canceling your policy or letting your insurance lapse.