How Does A Lapse In Coverage Affect Your Insurance Rates? (2022)

Legal requirements

Most states require some level of auto liability insurance. This is the coverage that pays for the other person’s medical needs or property damage from an accident, if you’re at fault. So if you own a car and you’ve allowed the liability insurance on it to lapse, you might be violating the law – even if the car is parked and not driven. If you drive the vehicle and cause an accident without being covered, you’ll be cited and subjected to stiff fines or worse.

Is There a Penalty for Lapse in Car Insurance?

Almost every state requires you to have car insurance to legally drive your car. Even if you’re driving a registered car, the penalties you’ll face if you’re caught driving without insurance may include:
  • Fines of up to $5,000
  • License suspension
  • Impounding of your car
  • Jail time


Lapse FAQs

What Percentage of Life Insurance Policies Lapse?

As of 2018, the lapse rate for individual life insurance policies was 4.7% and for group policies was 5%.

How Does a Lapse in Coverage Affect My Car Insurance Rates?

A lapse in auto coverage generally results in higher rates being applied. The longer the lapse, the higher the rate. For example, drivers with policies that have lapsed for up to 30 days see an 8% increase in auto insurance rates. For those with lapses greater than 30 days, the rate increase is about 35%.

Does an Insurance Lapse Affect Your Credit Score?

Most policies lapse without affecting credit. However, if the policyholder owes the insurer for coverage, the insurer may report the debt to a collection agency. Under those circumstances, the lapse can precipitate a decrease in the policyholder's credit score.

What should you do if you have a lapse in coverage?

If your car insurance accidentally lapses, start by calling your current insurer. While it’s not a guarantee, it’s possible they can reinstate your policy with minimal consequences, especially if it’s only a lapse of a few days.

If your insurer is requiring you to get a new policy, it’s worth shopping around for a better price. But do so quickly — the longer you go without car insurance, the steeper the penalty will likely be once you restart it.

The one thing you should never do is drive uninsured. Driving without insurance is dangerous and illegal. Consequences vary by state, but common penalties for driving while uninsured including losing your license and having your car impounded. If you’re involved in a crash while driving uninsured, you could even face jail time. If you are uninsured and need to drive your car, you need to get back onto an insurance policy.

Of course, this is easier said than done if you’re unable to make your car insurance payment. We always recommend checking with multiple insurers to find an affordable rate. You may be able to save even more by qualifying for extra discounts or by lowering the amount of coverage you have.

>> LEARN MORE: Auto Insurance Discounts You May Qualify For

Best insurers for lapsed car insurance coverage

We found among our sample insurers that USAA had the lowest change in rates for a driver with an insurance lapse, as well as the lowest prices overall — a driver with a 60-day policy lapse may see an increase as small as 9% with USAA.

On the other hand, Allstate, while the most expensive option overall for our sample driver, didn’t raise rates at all for a 15- or 30-day lapse. This is why shopping around for the lowest rate is essential when buying car insurance.

Days since lapse 15 30 45 60 Allstate$4,381$4,381$4,381$5,670$5,670State Farm$2,149$2,693$2,693$3,432$3,432USAA$1,166$1,272$1,272$1,272$1,272Average$2,565$2,782$2,782$3,458$3,458

When Does Coverage Lapse?

Insurance lapses can happen at different times, depending on the type of insurance. For example, with car insurance, your policy may lapse soon after you miss your payment. The same can happen with many kinds of insurance policies, unless your policy has a cash value such as with some whole life insurance policies. In that case, your policy may lapses after its cash value is exhausted.

Insurance policies often provide grace periods after missed payments so that the policy doesn’t immediately terminate. During the grace period, you retain the coverage provided by the policy, or at least limited benefits, if you can make the payment and reinstate it before the insurance company officially cancels it.

Grace periods can vary by company and state laws. With car insurance, for example, state laws usually give between a 10- and 20-day grace period before your insurer can cancel your coverage.

Insurance rate increases

After a car insurance lapse, you may find it harder to get insurance at an affordable rate. You may even have to resort to a company that specializes in risky drivers – which is almost never a good deal, since high-risk insurers charge more for their policies. 

My Car Insurance Lapsed, and I Had an Accident

If your car insurance lapsed and you had an accident, you’re personally liable for the damages. When the insurance policy could have covered your losses, you have to pay your damages out of pocket. Also, if the other side has a claim against you, they may seek payment from your personal assets rather than from the insurance policy.

However, even when your car insurance lapses and you have an accident, traditional rules of car accident fault and liability still apply. You can fight that you’re at fault for the accident, and you can even claim compensation from a third party.

Frequently asked questions

What is the best auto insurance company?

The best car insurance company for you will depend on your individual characteristics and policy preferences. To find the best auto insurance for your own circumstances, you may want to start by generating quotes from some of the best car insurance companies available.

Will even a short lapse cause my premiums to increase?

Whether or not a short lapse increases your insurance premiums depends on your insurer and the reason for the lapse. You’ll get the best results if you handle the situation immediately, so your insurer can see that you’re making a good-faith effort to rectify the situation.

What happens if my insurer won’t reinstate my policy?

If that happens, you will want to search for a new policy quickly. Insurance lapses get reported to the DMV, so any insurer you query may know about your lapse. Shopping around and getting multiple quotes is the best way to find a competitive insurance rate.

How much is car insurance by state?

The average cost of full coverage car insurance in the United States is $1,674 per year. However, the average cost of car insurance varies by state. The cheapest state for car insurance is Maine, where drivers pay an average of $965 per year for full coverage insurance. The most expensive state for car insurance is Louisiana, where the average driver pays $2,724 per year for full coverage insurance.

How a lapse in coverage affects car insurance rates

If you have a lapse in coverage, your car insurance company may perceive you as a higher-risk driver – and may charge you more as a result. Policyholders with a lapse in car insurance coverage pay an average of $1,861 per year for full coverage insurance, nearly $200 more than the national average of $1,674 per year, according to our analysis of data from Quadrant Information Services.

On average, those with gaps in their insurance pay around 11% more for their coverage.  It’s also possible for your insurer to decline to reissue your coverage after a lapse. In this case, you would have to find a new policy with a new carrier. Since your insurer is required to report your lapse to your state’s DMV, any new insurer will know about it and may charge you higher premiums as a result.

What to Expect If Your Car Insurance Lapses

Here are some of the things that can happen if your car insurance lapses:

You pay for your own damages entirely out of pocket – When a minor car accident happens, Florida law requires both parties to go straight to their own insurance to pay for their damages. Unless you have severe or permanent injuries, your car insurance is your first and last resort for coverage in the event of an accident. When your car insurance lapses, you have to cover your losses out of your own pocket.

You’re personally on the hook if you’re responsible for another person’s damages – Perhaps the most significant risk that you take when your car insurance lapses is that you’re going to be personally liable for someone else’s losses in the event of an accident. Florida no-fault law allows for third-party claims if there are severe injuries. Of course, serious injuries come with serious damages. With a lapse in car insurance, the other party may seek to recover from your personal assets. Property, bank accounts, and personal items are all on the line.

It’s more expensive to buy insurance – While it might seem unfair, it’s less expensive to purchase car insurance if you already have it. When your car insurance lapses, you can expect to pay extra when you go to buy a policy. Usually, it’s legal for insurance companies to discriminate in pricing for people who don’t have current insurance.

You violate state law – Florida law requires

You violate state law – Florida law requires all drivers to have car insurance. If you don’t, you face receiving a citation from law enforcement. Your license plate may be canceled until you can show that you have insurance in place. There are escalating fines for repeat offenders.

It can be a breach of the car lease agreement – When you lease your car, there’s almost always a requirement that you maintain car insurance. Of course, if your policy lapses, you’re breaking your car lease agreement. If the leasing company finds out, they may try to repossess your vehicle.

What To Do If You Have A Lapse In Coverage

If you experience a car insurance lapse, the most important thing to remember is that you should never drive uninsured. Driving without auto insurance can be a costly mistake. It’s also against the law. If you don’t have car insurance for a period of time, find another way to travel.

Drivers that find themselves without car insurance should get a cheap policy as soon as possible to avoid higher rates in the future. The longer you wait, the more expensive your rates will be once you get insurance again. If you’re having trouble affording your premium, consider restructuring your policy using some of the tips outlined above.

Will Car Insurance Rates Increase After A Lapse In Coverage?

Most car insurance companies will raise your rates if there is a lapse in coverage on your record. This is because a coverage lapse will make you look like a riskier party to insure. The increase in your premium may be small for a lapse of less than 30 days, but every auto insurer is different. A lapse in coverage of more than 30 days could translate to hundreds of dollars more owed per year.

How To Restore Coverage

Reinstating a lapsed policy typically allows you to maintain continuous coverage so you are still covered.

Because reinstatement procedures can vary, you’ll want to call your insurance company directly to determine what you need to do to reinstate your policy. This could mean paying a past-due balance or renewing your policy. If you can’t reinstate your policy, you’ll likely have to get a new one with the same or different provider.

Car Insurance Lapse Grace Period

You may have a lapse in coverage because you missed the due date on your monthly car insurance payment. If it’s only been a short period of time, your insurance company may allow you a grace period. State laws require that your insurance company notify you before canceling your policy completely. You’ll have between 10-20 days, depending on where you live, to make your payment and avoid a car insurance lapse.

Rate Increases After a Lapse in Your Car Insurance

The Zebra explains that allowing a policy to lapse can jeopardize your eligibility for auto insurance. Some companies won’t sell a policy to drivers who can’t show continuous coverage for a certain duration. Drivers who have a limited history of insurance are considered a higher risk, so companies who will cover them charge a higher premium.

What can I do to prevent a lapse in coverage?

Depending on what the cause of the potential lapse is, there are steps you can try and avoid it. 

If you’ve sold your car and you don’t plan on getting a new one, consider getting added to a family member’s policy as a driver. This still counts as continuous coverage. 

In the case where your car is sitting in your garage not in use, you can also reduce coverage on it so your premiums are lower. 

If you know you can’t make your next car insurance payment, call your insurance company.

You can work with your insurance rep to figure out how to save money on your policy. That might mean to temporarily increase your deductible or reduce your coverage. 

And if you find that your car insurance is expensive, take this time to shop around.

Get a couple quotes from different insurance companies to see if you could be getting a better deal somewhere else. The savings might not be huge, but saving a few bucks is better than nothing.

Cover will get you an auto quote in as little as five minutes. All you have to do is answer a few short questions. Get your auto quote here

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