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How to Deal with an Auto Insurance Coverage Lapse


We’ve all had it happen. You’re out driving and you remember that you left the lights on or the refrigerator open. That’s a lapse of judgment. Having a lapse in auto insurance coverage is even worse.

Having a lapse in auto insurance coverage can mean higher insurance premiums, tickets, a suspended license, or even the refusal of your insurance company to cover you in the event of a future accident. But what is an auto insurance lapse?

Let’s examine how an auto insurance lapse happens, how to avoid it, and what to do if you’re in an accident when your coverage is temporarily lapsed.

What is an Auto insurance Coverage Lapse?

An auto insurance lapse is when you’ve gone without auto insurance coverage anywhere from a couple days to a couple months or, in the worst case, years.

The penalties for an insurance lapse range in severity depending on your insurance company and how long the lapse has been, but you can still incur penalties while not driving. Even one day without coverage can raise your premium.

Some insurance companies will give you a “grace period” allowing you to reinstate your policy if your coverage has only lapsed by a few days. But almost all insurance companies will refuse to cover the expenses of any accidents that happen while your coverage is lapsed.

There are plenty of reasons an auto insurance lapse might happen, including missed payments on your insurance policy, signing up for a non-renewing policy, or having your policy canceled by your insurance company.

You may also experience a lapse in auto insurance coverage if you’ve recently sold your only car, or if your car broke down or was in an accident.

It’s important to never let your auto insurance coverage lapse. If you are driving uninsured, you will be held personally liable for all expenses in the event of an accident.

You will also be issued a hefty fine if you are caught driving without insurance. Even though you might feel like the six-month backpacking trip might be worth canceling your insurance, don’t do it. Even if you don’t have a car, don’t cancel your car insurance.

The worst outcome from a lapse in auto insurance coverage is the inability to get future coverage. Fewer insurance companies will be likely to offer you a policy, as you’ll be considered a “high-risk” client.

Some insurance companies might still offer you coverage after a lapse, but they will charge you higher premiums for taking on your risk.

To an insurance company, it looks like you either chose to drive while uninsured or couldn’t keep up with your payments. If they do offer you a policy, they’ll likely demand you apply for more expensive coverage.

How to Avoid an Auto Insurance Coverage Lapse

Luckily, it’s easy to avoid a lapse in auto insurance coverage. Check with your insurance broker regularly to know when you need to pay your premium and make sure to pay it on time.

Most auto insurance policies automatically renew, which means your insurance company will typically send you a notification thirty days before your policy is set to renew.

If money is an issue and you know you are going to lapse on your coverage because you can’t pay your premium, find a way to borrow money. A lapse is that serious, as it will leave long-term damage on your standing with insurance companies.

Alternatively, you can ask to be listed as a driver on a family member’s insurance policy.

Some people might try to avoid a lapse by lying about when an accident occurred. They will argue that the accident occurred while they were covered.

If they’re found out, however, they’ve committed the serious crime of insurance fraud, which can land you some jail time.

What To Do if Your Auto Insurance Coverage Has Lapsed

Let’s say you’re driving without insurance and you get into an accident. It’s illegal in every state except New Hampshire to not carry auto liability coverage so that’s a very bad idea.

But, if you get in an accident and you’re not at fault you can still be entitled to some compensation if the at-fault party is insured. If this happens, you will usually be able to begin the claims process through the at-fault party’s insurance company.

If you are the at-fault party in the accident, you will be responsible financially for any medical expenses, repair expenses, or towing expenses you cause.

The legal penalties alone may be steep, as you’ll have to pay for all legal expenses out of pocket. The fines by state for driving uninsured range anywhere from $50 – $5,000.

Searching for insurance after a lapse in coverage can be difficult, though some companies will allow you to reinstate your policy. If you can’t reinstate your old policy, you need to purchase a new policy right away.

If you lapse for any reason, however good it is, the state will take away your right to drive and fine you to have that right reinstated.

If you think your coverage might have lapsed, call your insurance company and check to see if you’ve missed a payment. Many insurance companies will reinstate your coverage if you are only a few days lapsed.

If you have lapsed, request for a reinstatement right away. You might have to pay a reinstatement fee, but it’s a fraction of what not having insurance can cost you.

If you think you might experience a lapse, turn in your license plates to the DMV and cancel your vehicle registration, so that you are not driving a registered car in a state where it is illegal to do so without liability coverage.

Before your insurer cancels your policy, you will likely receive 30-days of advance warning.

A 30-day lapse alone can hike up your auto insurance rate by $130 per year, while a 60-day lapse can increase your premium $190 per year. In some states, your premium can increase by as much as 48% as the result of a lapse, costing you upwards of a $1,000 extra per year.

Some insurers do offer high-risk driver policies, but the insurance rates are exorbitant. If you think you can save money by canceling your insurance, think again.

Always maintain your auto insurance coverage, because you don’t know when you’ll really need it. If your auto insurance policy is about to lapse, call FrontLight insurance today!