Which States Have A Penalty For A Lapse
Different states have different laws around auto insurance, but many have penalties for allowing your coverage to lapse. In most cases, these penalties start small for the first offense and then increase for each subsequent offense. While most penalties start with monetary fees, driving without insurance can result in severe penalties, such as license suspensions or jail time.
What Does It Mean To Have Your Car Insurance Lapsed
Whenever your auto insurance policy expires or is canceled, it begins the period known as auto insurance lapse. Your auto insurance is kept as a record, and a period of being uninsured shows up as a gap in it. Thatâs actually where gap car insurance gets its name from.
When you have a lapse in your car insurance coverage, it means that you should waste no time in getting your car insurance reinstated with or without your previous auto insurer.
After two days, youâll notice that your auto insurance rates werenât as low as before.
Driving without auto insurance can also get you in trouble with the police if you are pulled over for something as simple as running a stop sign.
How To Restore Coverage
Reinstating a lapsed policy typically allows you to maintain continuous coverage so you are still covered.
Because reinstatement procedures can vary, youll want to call your insurance company directly to determine what you need to do to reinstate your policy. This could mean paying a past-due balance or renewing your policy. If you cant reinstate your policy, youll likely have to get a new one with the same or different provider.
Common Reasons For Coverage Lapses
Drivers who suffer a lapse often do so because of a cancellation of their car insurance policy due to:
- Nonpayment of premium.
- Failure to renew.
- Excessive traffic violations or serious accidents.
If your insurance company drops you for some reason, you need to get a new policy in place before the old one expires. Also, if you choose to switch providers, you must make arrangements carefully to avoid a lapse between when your current auto insurance policy ends and your new one begins.
How Do I Renew My Lapsed Car Insurance
Things to Do When Car Insurance Policy Has Expired
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When Your Car Insurance Lapses After Your Grace Period
None of the actions your insurer or the DMV can take should come as a surprise if youve let your car insurance policy lapse because your insurance company must communicate with you before canceling your policy. Youve also got a grace period before your policy officially lapses.
Car insurance grace periods vary by company and by state. A grace period is a length of time after your payment is due but before your policy officially lapses and youre without coverage. Car insurance grace periods can last anywhere from one day to a couple of weeks.
If youve missed your payment date, call your insurance company immediately. Youll likely be able to make a payment during the grace period and get your policy reinstated.
If you dont pay and your car insurance lapses after your grace period, expect some communication from your provider. Youll receive a cancellation notice in the mail or email before your policy is gone. This letter must come a certain number of days before your policy is officially canceled to give you a heads up in most states. The time varies, but it should be at least ten days prior.
If you want to cancel your policy because youll no longer be driving, like if youre leaving the country for a while, dont let your policy lapse. Instead, call your company and tell them you want to cancel. Letting your policy lapse is not the same thing as not renewing it.
What You Should Do When Your Car Insurance Lapses
How to Avoid A Car Insurance Lapse
Car Insurance Lapse Grace Period
You should receive notice before an insurance company cancels your policy. The car insurance lapse grace period is not set in stone and varies by state. Much also depends on the insurance company. Some may offer a brief grace period. That is why it is important to find an insurers grace period policy when shopping for coverage. Grace periods generally range between 10 and 20 days to allow you to pay the bill and avoid cancellation.
If the lapse in the grace period is very short, say 24 hours, many insurance companies will reinstate the policy. That can also hold true if your driving record while on the policy was good. Once the policy is reinstated, the insurance coverage generally remains continuous.
If the policy lapses because the premium was unpaid, the insurance company will often reinstate the policy once funds are received. Expect to pay a fee if this happens.
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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 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.
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What Should You Do If You Have A Lapse In Coverage
If your car insurance accidentally lapses, start by calling your current insurer. While it’s not a guarantee, it’s possible they can reinstate your policy with minimal consequences, especially if it’s only a lapse of a few days.
If your insurer is requiring you to get a new policy, it’s worth shopping around for a better price. But do so quickly the longer you go without car insurance, the steeper the penalty will likely be once you restart it.
The one thing you should never do is drive uninsured. Driving without insurance is dangerous and illegal. Consequences vary by state, but common penalties for driving while uninsured including losing your license and having your car impounded. If you’re involved in a crash while driving uninsured, you could even face jail time. If you are uninsured and need to drive your car, you need to get back onto an insurance policy.
Of course, this is easier said than done if you’re unable to make your car insurance payment. We always recommend checking with multiple insurers to find an affordable rate. You may be able to save even more by qualifying for extra discounts or by lowering the amount of coverage you have.
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Can A Lapsed Life Insurance Policy Be Reinstated
Life insurance policies typically have a reinstatement provision that details the policy’s requirements that must be met for reinstatement. For example, yours might state if your policy has lapsed for more than 60 days, you’ll need to provide evidence of insurability to be considered for reinstatement. To provide evidence of insurability, you may need to confirm that there have been no changes to your health since the policy was written, or you can undergo the life insurance application and underwriting process again. Review your contract’s reinstatement provision to understand exactly what requirements you’ll need to meet.
Keep in mind that regardless of when you reinstate your policy, you’ll be required to pay all back premiums due and penalties that have accrued. You should start the reinstatement process by contacting your insurer directly to find out your options.
How To Prevent A Lapse In Car Insurance Coverage
Its best to prevent lapses if you know one is possible. For instance, if you plan to be out of the country for a time, call your company. If your car is going to be in storage, you may be able to switch to a simple policy with just comprehensive coverage while youre away that could maintain your coverage and offer a reduced premium.
To avoid unexpected lapses, you may want to set up a system to remind yourself when your premium is due. If you are switching from one policy to another, you may want to double-check that theres no time unaccounted for between the ending of the old policy and beginning of the new one.
If you expect to stop driving entirely, youll need to contact your insurance company to cancel your policy. You may also want to call your DMV to find out if there are any state requirements that youll need to handle first, such as handing in your license or canceling your registration. Many states allow you to retain your license as a means of identification others offer non-drivers licenses that can be used in the same way.
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The Costs Of An Insurance Lapse
Letting your car insurance lapse can create multiple problems. When your insurance company notifies the DMV that they no longer cover your car, you are subject to a number of penalties that vary by state.
Common penalties for car insurance lapses include:
- Fines and reinstatement fees.
- SR-22 financial responsibility filing requirement.
Also, remember that there are severe consequences for driving uninsured. If you are caught driving without insurance you face:
- Driver’s license suspension.
- Increases of your premium.
Lastly, if you drive uninsured and cause an accident, you are financially responsible for damages and injuries that occur. Without auto insurance, these costs can add up quickly and be devastating to your finances.
Make Sure Your Payments Arrive On Time
First and foremost, keep your insurance payment current. Consider opting into automatic payments, and always keep your credit card information up to date with your insurance company. Payment options will vary from one insurance company to the next, but you will typically have the option to schedule your payments to be pulled from the account of your choice, and sometimes even on the date of your choice.
If you want to take advantage of pay-in-full discounts, consider paying funds in advance to make sure you have enough on hand to pay your full policy premium when it comes time for renewal.
If you think that making an upcoming payment may be a struggle for you, contact your insurer ahead of time. It is much easier to address payment issues proactively rather than reactively.
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Will My Auto Insurance Rates Increase After A Lapse In Coverage
In many cases, an insurance lapse can significantly impact your car insurance premiums. However, there are a few exceptions.
For example, if you only go a few days without coverage, or if you can provide an explanation the insurer finds adequate, they may not raise your rates at all. However, if you let your policy lapse for an extended period, you are more likely to see a rate increase when you obtain a new policy.
If you’relooking for insurance after a lapse in coverage, remember that every insurance company is different. Some companies view a lapse in coverage as a more significant concern than others.
Any increase in premiums you may experience from a lapse in coverage will typically be seen immediately following the lapse. Once you’ve had coverage reinstated and can provide proof of continuous insurance, you may be able to get a better rate at renewal or by changing insurance providers.
Consequences Of Lapsed Car Insurance
Most states require drivers to have auto insurance. The consequences of driving without insurance can be great, even for those who can prove they have adequate finances to cover damages. Without insurance, assets, such as personal finances and real estate, are at risk.
Auto policies can lapse for various reasons, such as missed premium payments or too many driving infractions. Policyholders with lapsed policies are considered a higher risk for the insurance company. If a policy lapses because of accidents or driving violations, it is likely that these activities will continue with the new insurer. Also, missed premiums compromise the insurer’s ability to properly cover losses.
Because of the increased risk to the insurer, premium rates increase for policyholders with lapsed coverage. For some, they may be deemed uninsurable, requiring them to obtain coverage from low-rated insurers. The longer the lapse in coverage, the higher the rate will be.
Some states impose penalties for lapsed coverage. For example, Alabama will suspend the driver’s license and impose a $200 license reinstatement fee. If caught driving without insurance or without the minimum state limits, the driver could be required to obtain a court-ordered SR-22 certificate of financial responsibility, filed by the insurer. Because the SR-22 indicates a poor driving history, the insurance company will likely apply a higher rate for assuming the risk of insuring the driver.
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What Causes A Policy Lapse
There are numerous reasons for which you may miss out on paying your premium on time. However, your policy does not lapse immediately, even if you miss the due date of payment. Insurance providers offer a grace period during which time the benefits enjoyed under a policy remain active.
In most cases, the grace period is 30 days from the day on which your premium was due4. You can make your payment during this time and your insurance policy continues without any hiccups. However, if you are unable to do so, the insurer has the option to cancel your plan, resulting in a policy lapse.
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How To Avoid A Life Insurance Lapse
There are a few simple steps you can take to avoid missing a premium payment and jeopardizing your life insurance coverage:
Enroll in automated payments. Most providers allow you to set up automatic bank drafts for premiums so you dont have to track payments every month.
Switch to an annual payment schedule. If it fits your budget, paying premiums annually gives you fewer payments to stay on top of and may come with a discount.
Add a waiver of premium rider to your policy. Many providers offer a waiver of premium rider that exempts you from paying premiums if you become disabled.
Lower your coverage amount. If affordability is a concern, you can usually decrease your death benefit amount or term length, which will lower your premiums.
Life insurance policies financially protect your loved ones if you pass away. You can ensure that protection by doing your part to prevent a policy lapse and knowing what your options are if you lose your coverage due to nonpayment.
How Do I Avoid An Insurance Lapse
Remember this simple rule: no insurance, no plates!
- keep the address for your vehicle registration and driver license current with the DMV
- have liability coverage from a company licensed by the NYS Department of Financial Services and authorized by the NYS DMV
- have your insurance company report any changes to the DMV immediately
- keep insurance coverage on your vehicle for as long as it is registered in New York
- respond to DMV Insurance Letters and Orders immediately
- surrender your vehicle registration and license plates to DMV before your New York State coverage ends for any reason
If you do not have valid auto liability insurance coverage for your vehicle, you must immediately surrender your registration and vehicle plates.
Motorcycle plates do not have to be surrendered to DMV when auto liability insurance lapses. However, it is illegal to operate a motorcycle when it does not have proper auto liability insurance.
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What Is A Lapse In Your Insurance
A lapse in your insurance coverage is whenever you dont 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 youll 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 didnt 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
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