How does a car insurance lapse affect insurance rates?

How a lapse in coverage affects car insurance rates

A lapse increases the cost of a new policy because insurers consider previous coverage when evaluating an applicant’s risk. A lapse indicates that a driver may be more likely to miss future payments. Insurance.com data show an average 11% increase after a lapse of seven days, 14% after 30 days and 22% after 45 days. Your actual increase may be higher or lower.

Length of insurance lapse	Average rate increase
Seven days	11%
30 days	14%
45 days	22%

Read our methodology

A lapsed insurance policy can sometimes be reinstated without a penalty if it is reinstated quickly. If you've missed a payment, paying it quickly might prevent your rates from increasing due to a lapse.

However, even a short lapse can increase your rates by 11%, and the longer the lapse, the more you will pay.

Why do car insurance rates rise after a lapse in coverage?

Car insurance rates rise after a car insurance lapse because the insurer views you as a greater risk if you haven't maintained your coverage. It's an indication that you might fail to pay your premiums and that you aren't a responsible driver.

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."

A lapse can result from:

A missed or returned payment resulting in cancellation
Switching insurers and canceling before the new policy begins
Failing to update payment information
An administrative or reporting error

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.

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

Avoiding car insurance lapses

You can prevent a lapse by making your payments on time and starting new coverage before the old policy ends. A missed due date does not always end coverage immediately, but cancellation notices, payment periods and reinstatement rules differ by state, policy and insurance company. Set up automatic payments to reduce the risk of a lapse for nonpayment.

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.

"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 any claims.

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

National and state average rates are based on state minimum car insurance.

This data set is based on:

Bodily injury liability that matches the state minimum requirement
Property damage liability that matches the state minimum requirement
Any other state-required coverage, which may include personal injury protection, medical payments and uninsured/underinsured motorist coverage
40-year-old driver
Honda Accord LX
Good credit
A clean driving record
12-mile commute, 10,000 annual mileage

FAQ: Car insurance lapse

How long does a lapse in car insurance stay on your record?

The lapse will always be on your record, but it won't always affect your rates. Most insurance companies have a lookback period (how far back they will look at your record) of three years, although some are longer.

What happens if car insurance lapses?

If your car insurance lapses, it means you don't have active coverage. Here's what can happen:

Fines and penalties. You might face fines or other penalties from your state.
License suspension. Your driver's license and vehicle registration could be suspended.
Higher premiums. When you get insurance again, it might cost more because insurers see you as a higher risk.
Financial risk. If you have an accident while uninsured, you'll have to pay for all damages and injuries out of pocket.
No coverage. Without insurance, you're not protected against theft, damage, or other losses.

It's important to avoid a lapse by renewing your policy on time or finding new coverage right away.

What is a lapse in car insurance penalty?

A lapse in car insurance can result in penalties such as fines, registration suspension, or even license-related actions, but there is no single national penalty. Consequences depend on state law, whether the vehicle remained registered, and whether you drove it. New York imposes daily civil penalties or suspends registration, while Florida warns that failing to surrender a plate after insurance ends can result in license suspension.

Can a one-day lapse raise my car insurance rate?

Yes, it can. Some insurers treat any break in coverage as a lapse, but the effect depends on the company, state, reason for the gap and length of the lapse.