How a lapse in coverage affects car insurance rates
A lapse in car insurance will increase your rates. Insurance companies see drivers who have allowed their car insurance coverage to lapse as a sign that you are a higher risk. Maintaining continuous coverage will keep your rates lower.
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. A 45-day lapse can result in an increase of up to 22%.
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 also indicates 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."
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
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 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
Insurance.com commissioned Quadrant Information Services 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 2023 Honda LX.
Frequently asked questions: Car insurance lapse
How long does a lapse in car insurance stay on your record?
The lapse will always be on your record, but 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 lead to several penalties:
- Fines: You might have to pay fines for not having insurance.
- Suspended license: Your driver's license and vehicle registration could be suspended.
- Higher rates: Future insurance premiums may be higher.
- Impoundment: Your car could be impounded if you're caught driving without insurance.
- Financial Responsibility: You’ll be responsible for all costs if you have an accident without insurance.
It's best to keep your insurance current to avoid these penalties.
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