Car insurance with a suspended license

If your license gets suspended or revoked, what happens to your car insurance? Can you keep car insurance with a suspended license, or will it be canceled?

If you have a suspended license, car insurance can get complicated. While your car insurance won't be canceled automatically just because your license is suspended, you still can't drive legally. Your car is insured. You, as a driver, are not.

Read on to find out how car insurance with a suspended license works, how car insurance companies can see if your license is suspended, and what you need to do to keep your car insured.

Will my car insurance be canceled when my license is suspended?

States laws don't allow insurers to cancel a customer's policy in the middle of a policy term without a very good reason. Those reasons are typically limited to issues of nonpayment, fraud and misrepresentation.

State regulators don't want insurance companies to automatically cancel an auto policy, even if a driver has lost his license.

That's because while one driver may make a mistake, often other drivers may use the same car. And insurance is on the car, not the driver.

"The basic rule for personal auto policies is: Insurance follows the car," says Tippy. "You have a contract, and it follows the car. Because people don't have perfect knowledge, insurance companies are constrained in how quickly they can take action and what presumptions they can make."

Eventually, however, you will lose your auto insurance, or, if there are other drivers on the policy, you will need to be removed to keep the coverage.

If you are in the middle of your policy term, and your policy does not contain an exclusionary clause for driver suspensions, you likely will remain covered until the end of your term. 

Will insurance cover me if my license is suspended?

Increasingly, insurers are inserting language into policies' fine print to address the problem of suspended drivers getting behind the wheel.

The language typically goes something like this: If you have failed to report within 60 days that a member of your household has had his or her license suspended or revoked, that driver would not be covered by your policy.

"Insurance companies are seeing some of the problems they're encountering and they're throwing in different exclusions as to who can drive the car, trying to control the unusual cases," says Glenn Tippy, president of the Professional Insurance Agents of New Jersey.

Of course, if you’re caught driving with a suspended license, you’ve made things that much worse for yourself. Driving on a suspended license is a serious offense. (You automatically go into the high-risk driver category.)

You could wind you getting fined, having your car impounded and even go to jail for driving with a suspended license. You'll also have to hundreds or even thousands more for your next car insurance policy.

You will almost certainly face an SR-22 requirement – an insurance company’s guarantee to your state that you have the required insurance coverage in place – when you get your driver’s license back. You will pay much higher car insurance rates because of the offense that triggered the suspension and the SR-22 filing.

The only good news is that you have far more to gain by shopping around for coverage when you go to get insured again.

Can I get car insurance with a suspended license?

Possibly, but it's difficult. Most car insurance companies require an insured driver to be licensed. 

The rules are different if you're a new customer trying to get insurance on a suspended license versus someone who already has insurance. In that case, an insurance company gets a certain amount of time -- typically from 30 to 90 days -- to conduct a background check and cancel your policy. Having an invalid license would certainly mark you as high risk and your policy would be canceled.

In most cases, the insurance company is only required to provide you with 10 days notice, because the cancellation is due to you having misrepresented yourself as a licensed driver.

In most cases, the policy will not be issued in the first place; insurance companies can run motor vehicle records pretty quickly and will find out that your license is suspended. It may be instant or a matter of days.

In some cases, you may be able to apply for a hardship license, which will allow you to drive only for specific tasks, like getting to and from work. You will then be able to get insurance, but bear in mind that you'll be seen as a high-risk driver and can expect higher rates.

Can insurance companies see if your license is suspended when you already have a policy?

Most insurance companies don't check on your license mid-term.

The renewal date is when the insurance company is most likely to run your name through motor vehicle records and other informational databases. If that check reveals your driver's license has been suspended or revoked, you can bet the insurer is not going to renew your policy.

The insurance company is required to send you a notice informing you that your coverage is to be suspended at some future date, typically at least 30 days out. Insurers cannot backdate a cancellation, even if you had lost your license earlier.

What happens to my car if I don’t have a license?

If your suspension is short and your license will be reinstated by your next policy renewal, you may be able to simply park the car for the duration of the suspension.

If your suspension is longer, you have some choices to make. Insurance companies calculate rates based on the record of a licensed driver. If you don’t have a license -- or at least an imminent reinstatement -- you can’t get an insurance policy.

A registered car is required to have liability insurance in every state except New Hampshire. And if you are still making payments on the vehicle, your lender will require that you keep collision and comprehensive coverage on it as well.

One option, if you are still making car payments, is to find an insurance company that will allow you to designate another driver as the primary operator and exclude yourself from coverage. There are restrictions as to who that can be; many insurance companies will require that the person listed as the driver also be listed on the registration.

If you own your car outright, your other option if you lack insurance is to park the car and either turn in the plates or find out if you can register the car as "in storage", in which case you may be able to get a policy that's comprehensive-only. Be aware, however, that this type of policy is doesn't meet the legal requirements to drive on the street,

What if I don’t own the car I drive?

If you drive a car owned and insured by someone else, you will need to inform the insurance company right away and remove the suspended driver. The policy itself won't be affected as long as you let the company know. If you fail to do that, however, there can be consequences.

Take, for example, a young driver who gets a ticket and temporarily loses his license, yet neglects to tell his parents. The parents would continue to be covered on the auto insurance policy, even if it contains the above exclusion for known suspended drivers.

"If you don't know, and your kid doesn't tell you, then your 60 days hasn't started," says Tippy. "If there's ambiguity, if there's a lawsuit, it will be construed against the maker of the policy, which is the insurance company."

In other words, the insurance company would have to prove that whoever was driving -- a parent, a neighbor, a friend, a roommate -- knew about the license suspension and still didn't contact the company within 60 days.