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So You Have a Lapse in Car Insurance. What Do You Do?

Sometimes, lapses in car insurance coverage happen. Sometimes it happens when you get deployed overseas. Other times, it’s because you get behind on your monthly payments. You may have even been recently convicted for a violation that your insurance company deems worthy of coverage cancellation, or are returning to the road after several months or years without owning a vehicle. Regardless of your situation, picking up where you left off and starting a new auto insurance policy can become an expensive headache very quickly. Below, we’ll get into how you should navigate these treacherous waters in order to get back on the road and driving legally with an insurance policy you can actually afford.

Lapse of Coverage Penalties

If your car is still registered with your local DMV, but your insurance coverage gets canceled for whatever reason, you won’t just be in trouble with your insurance company – you’ll be in trouble with your state government, too (the only exception to this is if you sell or transfer ownership of your vehicle before cancelling your coverage). Even if you don’t get caught driving without insurance while you’re on the road, there are many states where insurance companies are legally required to inform your local DMV that you no longer have coverage, and that you may be driving illegally. Many states will revoke your license, charge you heavy fines, and may even require you to file an SR-22 in order to be able to drive legally once again. You’ll have to check with your state laws to make sure you know what you’ll have to pay to achieve legal status once again, but some common types of fines include:

  • A license reinstallment penalty costing anywhere from $14 (CA) up to $500 (MA). This fee, is some states, is likely to increase with multiple offenses.
  • Instead of a flat fee, some states charge a small financial penalty for each day that you go without insurance. Depending on your state, this daily compounding fee may also be combined with a flat penalty starting on day one of your lapsed coverage. South Carolina drivers are lucky, though; their daily compounding fee is capped at a total of $200. Most other states will continue charging you until your coverage is reinstated and the fees are paid.
  • In still other states, the laws are much more relaxed. North Dakota, New Hampshire, and Iowa have no financial penalties at all for a lapse in coverage. In Montana, they will be forgiving of your first lapse in insurance; but subsequent lapses will be subject to fines and legal penalties. In Missouri, nobody will know that your coverage is lapsed until you get pulled over by the police. But if you do get pulled over, you’ll have to face some very serious consequences.

Common Causes for a Lapse in Car Insurance Coverage

There are many different you may end up suffering a lapse in your car insurance coverage. But the two main causes are either financial, or circumstantial:

  • Missed payments or failure to renew. This is one of the most common forms of coverage lapse. This is also the most common scenario in which your local DMV will be immediately notified that you are no longer carrying insurance coverage as required by law. And as soon as that happens, you can expect to deal with any of the financial penalties listed above.
  • Moving and/or travelling. Active duty military servicemen and women, along with college students (whether traveling within the country or abroad for studies) are the most vulnerable to being penalized with a lapse in coverage due to the fact that they may not be driving the car they own for many months at a time or longer. If you fall into either of these categories, you should know that most car insurance companies are willing to work with you to keep your insurance current while you aren’t using your vehicle. Many even offer significant premium discounts while you are away, or will even suspend your coverage for free under special circumstances.
  • Selling your car. If you sell your car for whatever reason, and cancel your insurance coverage in turn, you’re going to find a tough time finding an affordable insurance policy if and when you decide to start driving again. It may not make any financial sense whatsoever to maintain a car insurance policy if you don’t own a car; but even if you had a perfect driving history in the past, the lapse in coverage still gives your prospective insurance company the right to charge you a higher premium – or to refuse to issue you a policy altogether. However, many insurers will start offering you a reasonable rate on your monthly premiums after you have maintained your new coverage for anywhere from 6 months to a year.
Auto Insurance Rates by Length of Coverage Legend: Newly Insured 6 Months of Coverage 1 Year of Coverage or More Nationwide Allstate Farmers State Auto 15 30 45 60 75 90 105 120 135 150 $164 $148 $126 $155 $140 $94 $108 $104 $87 $108 $97 $87

How a Lapse of Insurance Coverage Increases Your Premiums

No matter what, there’s a very high likelihood that once you get your policy reinstated after a lapse in coverage – even if that coverage was for as little as a single day – you’re going to be paying higher premiums no matter what. Many companies are willing to offer only a small rate increase, sometimes as little as 8% or less, as long as the lapse was short and you were very proactive in getting your coverage reinstated. But if, for whatever reason, it took you longer than 30 days to renew your policy or to purchase a new one, you can expect some substantial increases, as you can see in the chart below:

Auto Insurance Rates by Length of Coverage Lapse Legend: Short Coverage Lapse Extended Coverage Lapse State Farm State Auto Farmers Nationwide 20 40 60 80 100 120 140 160 180 200 220 $72 $156 $104 $206 $99 $187 $121 $233

What to Do If You Have a Current Lapse in Coverage

One of the worst things you can do when your insurance coverage lapses is to drive illegally. But this can be hard for many, especially if your lapse in coverage is caused by the fact that you were struggling to pay your premiums in the first place. The consequences for driving illegally without insurance can be very expensive, and may even result in jail time depending on your State’s laws.

The best thing you can do is to shop around for a bare minimum policy once you have a chance to purchase coverage once again. In the chart below, you can see examples of how expensive insurance premiums are for a liability only policy (the bare minimum amount of coverage you must purchase in order to drive). It may not give you complete peace of mind as far as what financial troubles you may face in the event of an accident or the need to file a claim. But it will at least keep you driving legally and give you the opportunity to save up for more coverage in the future.

Liability Only Car Insurance Rates Legend: Liability Only Policy Arkansas Florida California New York Texas Washington Virginia 10 20 30 40 50 60 70 80 90 100 $70 $90 $84 $87 $101 $54 $63

 
It’s going to be tough to recover from a lapse of insurance coverage, especially if your lapse is a long one. But there are things you can do to try and get a more affordable rate whenever you finally get to purchase a new car insurance policy. You’re going to have to compare quotes between many more car insurance companies than the average driver, due to the fact that most providers will either charge you exorbitant rates or refuse you out right because of your lapse. But if you take a minute to use our fast, free quote generator, it’ll only take you a fraction of the time to find a reasonable rate.

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