A lapse in your insurance coverage is any period of time that your car isn't insured by an active policy. Your auto insurance coverage may lapse if your insurance company cancels your policy, if your policy expired and you didn't renew coverage, or if you stopped paying your premiums.
In order for your policy to remain active, you need to pay your car insurance premium on a monthly, bi-monthly, or annual basis. Many companies offer grace periods to drivers who are late on their payments, but your coverage will still lapse if you exceed this grace period — and once it’s lapsed you will no longer be able to drive legally.
What is a lapse in your insurance?
A lapse in your insurance coverage is whenever you don’t have car insurance for your car. In nearly every state, all registered vehicles have to have insurance before you can drive them. Because insurance is usually required, a car insurance lapse can potentially bring legal penalties, including fines, license suspension, and more.
Any lapse in coverage is bad, but some companies may not penalize you with higher rates if your insurance lapsed for a short period. If your policy lapses for longer, not only will you pay more for car insurance when you get covered again, but your license may be suspended and you’ll have to pay a reinstatement fee to get it back.
There are a few common reasons that you may experience a lapse in insurance coverage. No matter the reason why your insurance lapsed, you're still likely to pay more for coverage after you get a new policy — even if you haven't driven or had coverage for months or years.
Your policy was canceled by your insurer
You failed to reinstate or renew a policy
You switched insurance companies and didn’t start your new policy on the same day your old one ended
You moved and no longer need a car so you canceled your car insurance
You're deployed and away from your car so you canceled your car insurance
Why would a company cancel my insurance?
There are a few reasons why an insurance company might cancel your insurance coverage. Your insurance provider may consider you too risky to insure after a DUI and decide not to renew your policy. Your insurer may also cancel your insurance if you have bad credit or if you get too many traffic tickets and your license is suspended.
Additionally, your insurance company may cancel your policy if you:
Stop paying your premiums
Lied on your application
Submit a false claim or lie to an adjuster after a claim
Were diagnosed with a condition that makes it difficult to drive safely
What is a car insurance lapse grace period?
If you're having trouble making your insurance payments on time, a grace period could help you avoid a lapse in your coverage. Many insurers are required by states to offer a grace period for missed payments — during which your policy isn't canceled and your rates won't increase due to a lapse in coverage.
After you miss an insurance payment, your company has to let you know in advance that they plan to cancel your policy due to nonpayment. Depending on your company and where you live, this car insurance lapse grace period could be as short as a few days or as long as 30 days after your last payment.
If it's difficult for you to pay your auto insurance premiums on time, it's a good idea to talk to your insurance company and avoid having to rely on a grace period (and paying a possible late fee). It's possible that your insurance provider and you can set up a payment plan so that you can avoid a grace period and a possible lapse in coverage.
Consequences of a car insurance lapse
There are many negative consequences of having a lapse in your car insurance coverage. If your insurance lapses, you're no longer allowed to drive legally in most states.
If you do drive anyway, you risk losing your license and having to pay expensive reinstatement fees, fines, and could even face jail time if you injure another person while driving uninsured. You’ll also be on the hook for any costs associated with an accident you have while uninsured, so if you back into traffic and damage someone else’s car, you’ll have to pay out of pocket to fix it.
Even if you don't drive without having insurance, there are other ways that a lapse in coverage could negatively affect you, including:
Increasing future car insurance rates: If your insurance lapses for any amount of time, you may pay more for coverage in the future when you get covered again. This is because insurance lapses make you more risky to insure.
Making it harder to find coverage: If multiple insurance companies consider you to be too risky to insure after a car insurance lapse, it could be more difficult to find affordable coverage in your area. You may have to settle for increasingly expensive coverage, poorer customer service, and limited coverage options.
Repossession of your vehicle: Most lenders and lessors require you to have a full coverage policy under the terms of your financing agreement. If you fail to make your insurance payments on time and your policy is canceled, a lapse in coverage could result in the repossession of your vehicle.
Impacting 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 and result in fines depending on what state you live in.
How much will rates increase after an auto insurance lapse?
If your insurance lapses, you'll pay more for coverage in the future when you reinstate your policy. How much more you'll pay after a lapse depends on several factors.
In addition to higher rates, you'll lose any discounts on your car insurance that you got for continuous coverage. This discount amount varies by company, but losing it after a lapse may add at least 10% to your total premiums.
How much your auto insurance rates will increase after a coverage lapse also depends on the reason why your coverage ran out. If you lost coverage for a short period of time because you couldn't afford to pay your premiums, your rates will be less than if your license was suspended after a DUI or at-fault accident — after which you'd be considered a high-risk driver.
What to do if your car insurance lapses
If your car insurance lapses or is in danger of lapsing, you have some options that can help you avoid the most serious consequences of not having insurance.
Take advantage of the grace period offered by your company to try and make up for lost payments or figure out a plan, then you should:
Contact your insurance company: Once you receive your notice, you should contact your car insurance company to learn the details of the potential cancellation, when your policy will end and your coverage will lapse, and whether you can work out an alternate payment plan to keep your auto insurance in effect.
Try to reinstate your policy: Most of the time, you can easily reinstate your policy within your cancellation grace period. You usually have to pay the premiums you owe and potentially a reinstatement fee, though.
Buy a new policy if you can’t reinstate your current one: Shopping for a new car insurance policy may help you to find a cheaper policy without lowering your coverage limits. If you can get covered before your policy officially lapses, you'll avoid more expensive premiums.
Do not drive uninsured: If your policy lapses before you can get covered again, under no circumstances should you drive without insurance. Because it's illegal in nearly every state to drive your car without insurance, you open yourself up to serious penalties if you're caught driving uninsured, and you’ll be on the hook if you get into an accident.
How to avoid a car insurance lapse
The best ways to avoid a lapse in car insurance is to make your payments on time, tell the truth when you're purchasing coverage or making a claim, and maintain a clean driving record on the road. To avoid a lapse in coverage, you should also:
Contact your insurance company: If you receive a cancellation notice, you should contact your insurance company right away. This way, you can learn about your company's grace period, potential ways you can avoid cancellation taking place, and possibly reinstate your coverage before it's too late.
Know your policy's expiration date: Pay attention to the term dates of your policy so that you don't simply forget to renew your insurance coverage (if it doesn't automatically renew) when it's time for a new policy.
Start a new policy on time: 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.
Shop for quotes: If you can no longer afford your car insurance premiums, you should shop for quotes from other companies. A high rate at one insurance company does not necessarily mean a high rate at a different company.
Evaluate your coverage levels and deductibles: You could also rework your coverage if you're having trouble making payments. If you're paying for more insurance than you need, or if your deductible is low, you could lower your total premiums by adjusting your policy.