Auto insurance companies can find out about your policy lapses by checking your CLUE report that includes your insurance history with the list of insurers, how long you had continuous coverage and if there are any cancellations and lapses between policies. CLUE report goes back 7 years so any cancellation or lapse in coverage can be seen in this period. Nevertheless, it may not matter that you had a lapse 4 years ago when you maintained coverage for the last 3 years and the company you applied to only considers the last three years of records. And there are many companies offering continuous coverage discounts even after 6 months.
The Comprehensive Loss Underwriting Exchange (CLUE) report is kept and served by a consumer reporting agency LexisNexis and tracks data for drivers across the country. Its main purpose is to report accidents and claim history. In the process, they record car insurance policy details, numbers, providers and periods. Nearly all automobile insurers provide information for the agency and pull the report when there is an application.
A lapse in coverage happens when your auto insurance is cancelled while you still own a vehicle. If you aren’t driving the automobile, moved it to a storage and confirmed this with the DMV by signing an affidavit of non-use, you may be alright. However, if you don’t do any of these things, still keep the car and don’t get insurance, the DMV may insist that you get car insurance and they may require you to file an SR-22. If you are required to file SR-22 because of lapsed vehicle insurance coverage or getting caught driving without insurance, it stays on your record for 3 years. You will need to continue with the filing for 3 years.
SR-22 form confirms that you carry at least state required minimum car insurance and usually filled and sent to the DMV by your insurer. Not every company offers this service and the ones that offer it usually charge a small fee.
Allowing your policy to lapse while you still own a vehicle raises many questions like have you been driving uninsured and increases your risk profile. Even if you weren’t, companies have no way of knowing it. So, people who are required to fill SR-22 forms because they are not reliable in keeping their vehicles insured are high-risk drivers.
Companies would be able to see convictions on driving records related to driving without insurance and charge higher premiums for the infraction, as well as asking for a fee to file the form. In other words, your rates go up because of the infraction resulting in you requiring to file SR-22 form and not because of the SR-22 requirement itself.
Without the SR-22 requirement or a conviction for driving without coverage, auto insurance companies would look to see if you have any coverage now and how long you have had continuous coverage to determine if you qualify for any discounts. If you have no coverage at the moment and you want to buy vehicle insurance, you are likely to pay around 6 – 9% higher premiums in comparison to someone with a long insurance history.
Essentially, your auto insurance history starts from fresh again once you buy a policy after the lapse. You could have had a lapse in coverage 2 years ago and you just bought a policy today. Your record in terms of insurance coverage starts today. From then onwards, companies start counting the years you have had continuous coverage rather than how long ago you had a lapse because continuous coverage gets you the discount.
The main reason people get penalized for lapse in coverage is that they lose their continuous coverage discount, which is easy to track. It is harder to look into lapse because people may have a legitimate reason for a lapse like they are deployed overseas. Then, they may have left the car locked up in storage and not driving or someone else may have been driving it without insurance. These are difficult things to check and verify. So, auto insurance companies stick to continuous coverage and assess the risks based on that.
On the other hand, the DMV would keep their records usually for 3 years after it is resolved and may react stronger if they notice another lapse in coverage in that period.
So, it is important not to let your policy lapse easily if you still need the coverage because not only will you lose your continuous coverage discount but also you would be chased by the DMV. Also, consequences of driving without insurance are heavy in terms of fines and penalties but also you may have to pay all the damages out of pocket if you get involved in an accident.
When you need to buy insurance shortly anyway, it may make sense for the purpose of keeping continuous coverage not to cancel the coverage for a short period of time even if you don’t drive or already sold the car.
If you missed a premium payment recently, your car insurance may not be cancelled yet as most states require automobile insurers to give a 10 – 30 days notice before cancelling your policy. So, you may still have time to make the payments and keep your policy going if you act quickly after realizing you missed the payment. If your current insurer isn’t willing to reinstate it, you can arrange a replacement policy before it is cancelled.