If you have previously spoken with an insurance agent to get a quote for car insurance, you may be asked about an lapse in coverage. How you answer this question can affect how much your insurance coverage will cost and even if coverage is available to you.
The main takeaway:
- Car insurance loopholes usually occur due to non-payment or late payments, or when there are multiple driving offenses or serious movement violations, such as a DUI.
- Gaps are considered a negative risk factor by insurance companies and can increase the amount you pay for car insurance.
- You can avoid the expiration of the car insurance period by joining the automatic payment program or paying a lump sum at the beginning of the policy term.
It’s an important question for insurers, who view lapses negatively when making policy decisions. Since it can have a huge impact on your finances, make sure you understand what a lapse of car insurance is and how it can affect you in the future.
Definition of auto insurance expiration
In almost every state, vehicle liability insurance is mandatory and required to operate a car, truck, motorcycle, RV or commercial vehicle. If for some reason you lose coverage, the meaning of auto insurance lapse becomes especially important.
Depending on the insurance company, if you don’t pay your premium within the stipulated time, your policy is considered expired or canceled. If you don’t have an alternative policy, you are essentially driving without insurance and may face government penalties and fines.
If you have an accident while your insurance period is over, you are considered an uninsured motorist with all the consequences of that, plus you are responsible for paying out-of-pocket compensation. In fact, the other mover may take additional legal action that could lead to future financial consequences that affect things like wages and your long-term credit history.
How do insurers see a lapse in auto insurance?
Auto insurance companies view the interval in coverage as an obvious negative. Whether you choose not to drive or lose access to your driving privileges altogether, insurance companies consider it a negative risk factor for future behavior.
Just like when you have a large number of tickets or a bad credit report, a fall in coverage is factored into an insurance company’s coverage decision and can negatively impact your chances of getting coverage with a reputable company.
Can the expiration of the car insurance period affect the prices?
The answer is definitely! While most insurance companies will allow you to keep your policy for as long as you pay within a predetermined grace period, many will charge a rate increase either immediately or upon reissue of your policy.
The amount of the increase is a matter of company-by-company basis, but often up to 8-10% if your policy is exceeded Less than 30 days And if it is more than 30 days, then this increase can grow to 30-35%.
Are there other potential financial consequences?
Yes, in addition to increasing your premiums, you may also lose insurance deductibles that you currently have, such as good pay or early payout deductions.
Additionally, if you rent your car or take out a car loan, a lapsed policy can lead to repossession by the bank or rental company. Having a full coverage policy is always a contingency on loan or lease agreements, and if you don’t maintain a policy in place that protects the loan or lease company, they will take possession of their property sooner rather than later.
Car insurance grace period
Most insurance companies have a grace period of 10-20 days, unless defined differently in your state. This means that you have a certain number of days after your payment due date to submit your premium and keep your policy fully valid.
Insurance companies will try to contact you before canceling your policy completely. You may receive a letter during the grace period informing you of the possible consequences of non-payment. They will also give you instructions on how best to make a payment so that you are in the know by the end of the grace period.
Common Causes of Car Insurance Expiry
Insurance companies make money and they are experts in evaluating each option to ensure their risk is mitigated through their decisions to provide coverage. When that coverage ends, they are usually quick to cut their losses and move on.
Here are several ways your car insurance may expire:
- missing batch Insurance companies realize that payment may be delayed at times and have developed a grace period policy to accommodate those times. If you miss payment in full, or if you are constantly late paying, your insurance company will notify you by mail of their intention to cancel your policy. There is usually a deadline by midnight that payment must be received, or the policy will suffer cancellation.
- Forgetting to renew the document Most car insurance policies usually renew automatically after six months or a full year. If you have a policy that does not have an auto-renewal clause, you will have to renew it before the term ends date. Forgetting this renewal date will cause the policy to lapse.
- To be dropped by your insurance company Your insurance company can drop you after a faulty accident, a series of tickets, or a serious moving violation such as a DUI or DWI.
- When you lose your driver’s license Most insurance companies will cancel your policy if they are notified of the loss of your driver’s license.
- If you misrepresent yourself – Your vehicle can be unlocked if you provide false or misleading information on your original insurance application.
Do you still need car insurance when you don’t own a car?
If you choose not to own a car, but occasionally drive someone else’s car, you may want to consider a no-car policy. The non-owners policy protects you if you have an accident.
Read more: Car insurance for non-owners: Do you need it?
However, if you live with someone who occasionally borrows, you may not have to worry about a no-car policy. Their policy will cover it in most circumstances although it’s always a good idea to double check with the insurance company to be sure.
Likewise, when you rent a car or drive a car to work (during business hours of course), that car should have insurance coverage that will cover you in the event of an accident or other problem.
How to avoid insurance expiration
It is always a good idea to avoid the expiration of your car insurance period if possible. No one wants to be labeled a risky driver or overpay for insurance.
Here are several ways to maintain your current insurance:
- automatic payment Subscribe to car payments as soon as you get your new insurance policy. It prevents you from experiencing any payment delays, plus most insurance companies offer a discount to participate in the automatic payment.
- Practice responsible driving habits – That sounds too easy… Be careful! By being responsible while driving, you reduce the risk of tickets, accidents, or other disasters.
- Do an annual insurance review – Strong financial planning includes conducting an annual insurance review of all of your insurance policies (including homeowners or renters, health, life, etc.) to ensure that you are paying the lowest premiums possible.
It’s easier than ever with online bidding engines that compare prices based on your personal information.
- Make sure you get all the discounts Review your policy to make sure you get all the discounts for which you are eligible, including any new deductions or ways you can change coverage to increase the deductibles, for example, be sure to take advantage of multiple policy discounts for home, life, business, etc.
Will suspending coverage prevent my confidentiality from expiring?
You may have heard of your coverage being suspended and want to consider this option. First, check with your insurance company to make sure they offer a suspension option for your policy. Next, what criteria must be met to qualify and maintain a suspension.
The suspension can be great for people who are studying abroad or are leaving the country and are not planning to take their car. It is rather the insurance policy will expire and keep you in good standing with your insurance company.
If you still keep a car or keep one in storage, you may need to keep only minimal liability insurance coverage (assuming it’s paid off). If the vehicle is rented or has an active and outstanding loan, you may be required to keep full coverage regardless.
Finally, you may need an affidavit from your local DMV certifying that you will not drive as specified on a state-by-state basis.
Auto insurance expiration penalties by the state
Some states impose penalties and fines when your insurance period has expired and some require insurance companies to report lapses when they occur.
If you drive without insurance, you face harsher consequences.
The good news is that you can find information about your state’s insurance guidelines, so there’s no need for guesswork.
Does Leaving Car Insurance Affect Credit?
No, paying your insurance late or leaving your car insurance does not affect your credit score. But the flip side is that paying on time doesn’t help your score either.
In fact, the insurance industry uses your credit score to assess risk factors, but it does not report financial information to credit bureaus.
What do you do if your car insurance falls out?
The first thing you need to do is contact your insurance agent and tell them what’s going on. They can help you with options and tell you how to proceed.
If you just missed the payment date by a few days, making the payment quickly can avoid all kinds of problems. If this is not an option, see if your insurance company is able to work with you on the payment plan.
When a payment has been left unpaid long enough to cancel the policy, you may need to re-apply for a new policy. Depending on the circumstances, the insurance company may start new coverage, but in all likelihood, the premium will go up.
If the insurance company refuses to process a new policy for some reason, you may be asked to pursue coverage through a non-standard or high-risk insurance company. These types of policies are expensive and often have limited coverage options.
How to find new coverage after the car insurance period has expired
Gaps in car insurance. If your insurance rates are raised after a certain period of time has elapsed, it is always a good idea to check current insurance rates to see if you are paying the best possible rate.
Not all insurance companies drop the same weight and there may be many options available to you. There is no penalty, no fee to compare prices and it only takes a few minutes.
To check it out – simply and easily – simply try one of the available quotes, such as the Einsurance.com car insurance quote engine. By entering some simple personal information, you can find offers that are easy to compare and give you the best deal for your circumstances.
Hopefully, you never have to deal with a lapse of time in auto insurance. It can be expensive and should be avoided. If you find yourself in a situation where you could miss out on payment or face license suspension, contact your insurance person early. Most insurance agents will do what they can to help.
Call Einsurance at 866-845-3808 for help with all your insurance needs or join us at einsurance.com to read the latest information on insurance of all kinds.