What Happens If Car Insurance Lapses?

Most insurers check if an applicant had any lapse in policy recently and may apply a surcharge if there is an interruption in coverage. That is what happens if auto insurance lapses. You may think that you will save some money by allowing your coverage end without a replacement policy or cancel it for couple of months when you are going away. This lapse in vehicle insurance cover may come back and cost you more than the savings you achieved.

How Insurers View a Lapse in Car Insurance Coverage?

Whatever the reason for the lack of cover it does not look good on your records. Companies separate motorists who allow their coverage come to end at every chance from the ones who diligently keep them in force. They like to see those premiums keep coming for years. They offer discounts and best rates so that customers will stay for a long time.

Why should they drop their prices for someone who may or may not stay long? Intermissions in policies suggest that the policyholder is not keen to keep coverage, negligent in the way he/she maintains it and maybe okay with breaking the state laws that require at least minimum liability cover.

Do You Have Good Reasons for Stopping Automobile Insurance?

As life changes we go through processes and stages. You may move abroad for a while and decide not to keep the car at home. Moving to a large city would increase the costs of insuring and keeping a vehicle.  You may decide that public transport is good enough for you to rely on and give car a skip. Or you may not be able to afford it anymore or just like to save the money.

These are all good reasons for giving up your policy. However, they are not good enough reasons to avoid the future rate increases when you want to reinstate car insurance. As long as you don’t drive while you are not insured you may be able to live with these rate hikes. Premiums will be higher for the first six months of getting covered again, at least. They will start coming down as long as you don’t have any claims.

Allowing your policy to be interrupted must be a decision based on calculations. If you are only going away for couple of months and keeping your car you may be able to still keep it insured. Many companies offer to reduce premiums substantially if the car is parked in a safe location while you are away. If the savings you will have much more than the possible rate increases, you won’t have any problem giving up the policies you have.

Going Uninsured with Lapsed Car Insurance?

Looking at the figures, about 14% of American motorists drive without insurance. Many motorists cannot give up driving even they don’t have the money to insure their vehicles. It could mean that they lose their jobs or simply cannot function without driving.

Nonetheless, the costs of getting caught without insurance can be significantly more than the premiums you saved. Depending on where you live you may have to pay large fines and court costs, face driving license suspension and impoundment of your vehicle. All of these will make it harder for you to find insurance coverage at reasonable prices in the future.

Having an Accident when Your Policy Lapsed

What happens if vehicle insurance lapses and you have an accident in that period? You will be in serious trouble if you were at fault in an accident and your policy ran out. First of all, you will still be liable to pay for the damages and injuries you caused. You will probably be taken to court by third parties who suffered losses in the accident. Plaintiffs will seek immediate damage settlement, liquidation of your assets or levy on your pay checks. Also, authorities will probably prosecute you for causing injuries while you don’t have at least liability cover.

Also, many states have some sort of “no pay no play” laws that will prevent an uninsured driver from claiming on third party policies even they are at fault. At least you won’t be able to claim for loss of wages and things like pain and suffering.

Any subsequent records of the accident and related tickets will make your situation much worse when you decide to get insured again. Carriers will not take it kindly to see that not only you had a gap in insurance but also you carried on driving. Some companies may refuse to offer a quote while others will want a lot of money to insure you.

Dropping Coverage when You Have a Lease or Loan

Your lease or loan agreement will most likely require you to keep the automobile properly insured at all times. The moment the leasing company or the lienholder finds out about the pause on your policy they will give you a short period of time to re-instate your old coverage or buy a new one. If you don’t comply, they can repossess the automobile in question or buy a policy for it at a steep price.

What Can Be Done to Avoid Lapse in Auto Insurance?

You should write the renewal date down on your calendar to avoid missing the date accidentally. If you are not confident about keeping track of things, set up automatic renewal and payment to keep the coverage going. Furthermore, pay the full premium at the start instead of instalments. This could save you interest charges or qualify for discounts as well as eliminating the chance of cancellation due to non-payment. Even a day without coverage can end up being costly for you.

Things to Know to Get the Cheapest Rates after a Lapse

  1. Remember that each company treats it differently. While a few companies would apply a surcharge for a gap in coverage some companies may not be bothered by it. So, you should get a few quotes from different companies to make sure you get the best rates for your circumstances.
  2. Insurers look at last 12 months to see if you maintained continuous coverage when you are shopping for a new policy. Previous years are not as important as last year.
  3. There is a chance some companies may ignore lapses less than thirty days that happened more than a year ago especially if you have a good excuse. But you should not rely on it.
  4. Members of the US army may be treated more favorably. Also, you may escape any premium surcharges if you were driving company car that is why you did not have your own insurance.
  5. Some companies may offer discounts for drivers who has never had a lapsed auto insurance policy for years. If you have no break in cover you want to make the most of it.
Share on Pinterest
There are no images.