Life doesn’t always go according to plan. You may have a bad month with unexpected or emergency bills and have no money in the bank when the premium is due. Then, what happens if you cannot pay the insurance for your car? If you know how valuable it is you wouldn’t want to lose the coverage, especially over an oversight or a mistake somewhere.
Many people make the mistake of thinking that carriers would be flexible enough to keep the business. This is not usually the case in real life and becoming less and less so. These days, many leading 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 Auto Insurance Cancelled if I Miss a Payment?
This would naturally be the first question you want answered. Do companies offer grace period for late premiums or just cancel a policy as a result?
First of all, most state laws don’t require insurers to offer a grace period for unpaid premiums. Therefore, it is up to each one of them to offer any leeway. Most don’t offer any grace period and the ones that offer it has a limited time window.
Companies 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 the vehicle insurance policy is terminated. However, some may use the advanced programming facilities they have and send you a courtesy text as soon as the date has passed. This doesn’t mean that they would wait until you make catch up. They may carry on as usual if you make it up immediately but they are not obliged to do so.
Some may wait couple of days if they are still keen to keep the business. So, if you realize the mistake and fix it immediately you may be able to rescue it. Nevertheless, some may refuse to re-instate it if you were late a few days or you have been habitually bad all along.
Many would stop the installment plan they agreed as soon as a policyholder is in arrears. Then, the only option would be to settle the remaining amount in full if you want to continue with the policy and are allowed to do so.
Furthermore, carriers that allow people catch up or reinstate are likely to charge a fee or penalty. This will further increase the costs but you might still be happy about it that you can just put it back the way it was.
What Happens if Auto Insurance Premium is Late?
In short, you should assume that the coverage would lapse if you were unable to come up with the money. You can contact the agent and see if they will re-instate it. Otherwise, you will need to reinsure your car. It is best that you do this as soon as possible for various reasons.
First of all, a break in coverage is something that affects rates when you need to buy another one again. If you manage to restore it or buy another in a short space of time you may be able to avoid a lapse recorded and others may not see it. Otherwise, it will cost you heavily because most companies charge higher rates to applicants with that in records.
One study suggests that motorists pay on average 10% higher automobile insurance rates if they have a lapsed coverage in their history.
Secondly, the provider would inform the DMV as soon as the policy is dropped. Then, you have officially no coverage and don’t even need to get caught driving. DMV learned from them that the liability protection is no longer available and they can quickly check if you bought replacement. Otherwise, they will be on your case for not having it.
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 it at least you shouldn’t drive it to avoid any costly accidents. This may not be enough and it 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 a policy in force to drive or keep it on the roads. You don’t need to be driving to need coverage. Owning a vehicle is enough to make you liable to buy at least liability.
What Is the Best Solution?
The best solution is to prevent cancellation due to financial problems by proactively managing the situation. Here are a few things you could do now that can reduce the pressure on the budget.
- Shop around for the Most Economical Package: Many people are pretty generous towards them. 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 firm and never compare alternative quotes. Wouldn’t it be better to mind costs when the times are good and put some money aside for rainy days?
- Make the Changes Beforehand: If you anticipate that it may stretch your budget don’t wait until it becomes a problem. Make the necessary changes on it to reduce costs. There are a few ways of reducing premiums. Perhaps it would be easier to manage it once you bring down the costs and you won’t have issues with lateness.
Unfortunately, companies are not keen to deal with people 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 before it happens to make sure it doesn’t cause you many other issues. Certainly, it isn’t easy to deal with tight budgets and this might not be on the top of the piles of bills but you should try your best to stay on top of it.