How does a car insurance lapse affect insurance rates?

Car insurance rates increase an average of 11% for drivers who let their policies lapse for even a week according to an analysis of Insurance.com data.

A longer lapse will result in a greater increase in your premiums; 14% for a 30-day lapse and 22% if your car insurance lapses for 45 days.

Read on to learn more about lapses in car insurance and how and why they affect your rates.

Why car insurance rates rise after a lapse in coverage

Lapsed coverage is the result of insurance payments that are received late or not received at all. Failing to maintain liability insurance for a registered vehicle is illegal in all states except New Hampshire.

Robert Passmore, spokesperson for the Property Casualty Insurers Association of America, says there's "no question that letting your insurance lapse is going to affect premiums in most any case."

Most lapses occur because of non-payment of premiums.

Loretta Worters, a spokesperson for the Insurance Information Institute, says, "Someone who has not made a payment on their insurance will be viewed by an insurer as risky and insurers will often charge them higher rates." Their paying higher rates because their now paying for high-risk car insurance.

Passmore says drivers who let their policies lapse are also statistically more likely to be involved in car accidents.

Each insurance company has its own formula for determining how high rates go after a policy lapse and how long the penalty will remain in place, Passmore says.

Drivers who experience a coverage lapse are not doomed to high rates forever, as long as they keep their coverage continuous and maintain a good driving record, Worters says.

"The financial consequences of a lapse in car insurance coverage do come down over time," Worters says.

Avoiding car insurance lapses

People who lose their jobs or are struggling financially may find it difficult to make payments, making them prime candidates for a lapse, Worters says. In other cases, a missed payment is unintentional. (See "When you forget to pay the car insurance bill.")

"It could be they just simply forgot to make a payment or perhaps there was a problem with their checking account," she says.

By law, insurers in most states may cancel coverage for nonpayment. Policyholders have a set number of days – which varies by state and insurer – to reinstate coverage before it is terminated.

The best way to steer clear of higher rates is to prevent a lapse before it occurs. Tips for avoiding a lapse in coverage include:

• Always pay your insurance bill on time. To avoid an accidental lapse, drivers should "submit their car insurance payments as soon as possible," Worters says.

• Be careful when switching insurance providers. "Buy the new policy and make sure that it's in force before you cancel the existing one," Worters says. Learn how to switch car insurance companies to avoid issues.

You are not covered during a lapse

Although your insurance company will likely contact you and give you an opportunity to pay your bill, as soon as the coverage you've paid for runs out, you're no longer covered. If an accident happens during that time, the insurance company will deny it.

While your current insurance company is likely to reinstate an otherwise good customer's policy after a short lapse, you can expect rates to go up and anything that happens during the lapse is not covered.

You may also face penalties from the state for violating the requirement to carry car insurance, including fines, if you're caught driving during a lapse.

Methodology

Insurance.com commissioned Quadrant Information Institute in 2022 to field rates for drivers across the nation from one week to a 45-day of lapse in insurance coverage for a full coverage policy with limits of 100/300/100. The rates are based on the profile of a 40-year-old single male driving a 2021 Honda LX.