Life doesn’t always go according to plan. You may have a bad month with unexpected bills and emergency payments and have no money in the bank when the premium payment is due. Then, what happens if you cannot pay the insurance premium for your car?
Many people make the mistake of thinking that their insurers would be flexible enough to keep the business. This is not usually the case in real life and becoming less and less so. Lately, many leading car insurance carriers are looking at financial indicators as a risk factor and these indicators are raising red flags when they come across an applicant with money problems.
Is Car Insurance Cancelled if I Miss a Payment?
This would naturally be the first question you want answered. Do insurance companies offer grace period for late premium payments or just cancel auto insurance policy for late payment?
First of all, most state laws don’t require insurers to offer a grace period for late premium payments. Therefore, it is up to individual insurer to offer any leeway for payments. Most insurers don’t offer any grace period for late auto insurance payments and the carriers that offer it has a limited time window.
Auto insurers are under no obligation to keep you insured if you miss a payment. They don’t also have to write to you or contact you in anyway. So, you shouldn’t count on them to let you know before your vehicle insurance policy is terminated. However, some companies may use the advanced programing facilities they have and send you a courtesy text as soon as you missed your payment. This doesn’t mean that they would wait until you make the payment. They may carry on as usual if you make the payment immediately but they are not obliged to do so.
Some companies may wait couple of days before they cancel your policy. So, if you realize the mistake and fix it immediately you may be able to keep your coverage. Nevertheless, some companies may refuse to re-instate your coverage if you were late a few days or you have been habitually missing payments all along.
Many companies would cancel the installment plan they agreed as soon as a policyholder misses an auto insurance premium payment. Then, the only option would be to pay the remaining premium in full if you want to continue with your policy and are allowed to do so.
Furthermore, carriers that allow late payment or reinstate car insurance coverage at a later date are likely to charge late payment penalty. This will further increase the premium costs.
What Happens if You Are Late on Your Car Insurance Premium?
In short, you should assume that your vehicle insurance would lapse if you were late in paying your premium. You can contact your insurer and see if they will re-instate the coverage. Otherwise, you will need to reinsure your car with a new policy. It is best that you do this as soon as possible for various reasons.
First of all, a lapse or a break in auto insurance coverage is something that affects your rates when you need to buy another policy again. If you manage to restore coverage or buy another policy in a short space of time you may be able to avoid a lapse in cover recorded and other insurers may not see it. Otherwise, you will pay for one late payment heavily because most insurers offer higher rates to applicants with lapsed coverage in their records.
One study suggests that motorists pay on average 10% higher automobile insurance premiums if they have a lapsed coverage in their history.
Secondly, your insurer would inform the DMV as soon as your policy is cancelled. Then, you are officially an uninsured driver and don’t even need to get caught driving without insurance. DMV learned from your provider that your liability coverage is cancelled and they can quickly check if you bought another policy. Otherwise, they will be on your case for not having the required coverage.
Thirdly, all along you will be running the risk of having an accident while you don’t have insurance. This is probably the most important concern for anyone. If you know that you missed or you will miss your premium payment at least you shouldn’t drive your automobile to avoid any costly accidents. This may not be enough and your vehicle may get damaged where it is anyway. So, it is important to fix the problem almost immediately if you can.
Fourthly, you would be breaking the law while you don’t have car insurance to drive or keep your car on the roads. You don’t need to be driving in order to need auto insurance. Owning a vehicle is enough to make you liable to buy at least liability automobile insurance.
What Is the Best Solution?
The best solution is to prevent vehicle insurance cancellation due to missed payments by proactively managing your coverage. Here are a few things you could do now that can reduce the pressure on your budget.
- Shop around for the Most Economical Policy: Many people are pretty generous towards their insurers. They are happy to take the first quote they receive without bothering to check if it is competitive enough. They also continue for years with the same carriers and never compare alternative quotes. Wouldn’t it be better to mind your costs when the times are good and put some money aside for rainy days?
- Make the Changes Beforehand: If you anticipate that your premium may stretch your budget don’t wait until it becomes a problem. Make the necessary changes on your coverage to reduce your premium cost. There are a few ways of reducing your vehicle insurance premium. Perhaps it would be easier to manage it once you bring down the costs and you won’t have issues with late payments.
Unfortunately, insurers are not keen to deal with late payments and policyholders with money problems. So, don’t expect much sympathy from them but expect them penalize you for these weaknesses. That is why, it is important to manage the problem like missed premium before it happens to make sure it doesn’t cause you many other issues.