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

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04/02/2024 09:55 PM

Key Points:

• If you have a lapse in your auto insurance, you’ll likely have a rate increase on your insurance premiums once you reactivate your policy or purchase a new one.
• If you cause an accident during a lapse in your auto coverage, you’ll be liable for property damage and other drivers’ medical bills.
• Depending on the state you live in, causing an accident during a lapse in auto insurance could result in steep fines, community service, or loss of your driver’s license.

If you’re wondering how a lapse in coverage might affect your car insurance policy, you’re not alone. Drivers often look for ways to make their payments more affordable and may consider canceling coverage, but going without auto insurance is never a good idea.

In this review, we’ll discuss the consequences of a lapse in coverage and what you can do to avoid a lapse. We also reviewed the best auto insurance companies in the nation, so if you’re ready to compare free auto insurance quotes and find cheaper rates, enter your zip code above.

What Does It Mean To Have A Lapse In Coverage?

A lapse in coverage simply means that you were not covered by an active insurance policy for a period of time. Whether the lapse in coverage was intentional or an accident, insurance providers will commonly penalize you by increasing the price of your insurance once you reactivate or purchase a policy.

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 no 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. Many providers and states allow a short grace period, but the longer you wait, the more expensive your rates will be once you get your new policy. 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 high-risk 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.

Why Is It Important To Avoid A Lapse In Coverage?

If you find yourself in financial strain, our first piece of advice is to not cancel your car insurance policy. A lapse in coverage and the repercussions of driving without the minimum auto liability insurance required by your state might be worse than you think.

Consequences can get more severe if you cause an accident while you’re experiencing a policy lapse and can include things like:

• Community service hours
• Fines (varies depending on your location)
• License suspension, vehicle registration suspension, and revocation of license plates
• Reinstatement fee to get license, registration, and plates returned
• Jail time up to three months (varies depending on your location)

Plus, if you cause a car accident during a lapse in your car insurance coverage, you’ll be responsible for the cost of medical bills and damages that you cause.

Do’s And Don’ts Of Auto Insurance

Whether you’re having trouble making your car insurance payments or are worried about a future strain on your finances, here are some things to keep in mind about lapses in insurance coverage:

Practice routine car care.

Car care is important to save money on repairs in the future. Here are some things you can do to care for your car:

• Change the oil yourself: You can buy oil at most convenience stores and service centers that are staying open.
• Check the tire pressure: You can find instructions on how to check your car’s tire pressure in the owner’s manual.
• Inspect your windshield wipers: Typically, wipers last six months before needing to be replaced.
• Wash your car: This is a good activity to get some fresh air and will benefit your car during pollen season, too.

Choose a higher deductible to save money on your premiums.

This can be a good idea if you’re a safe driver with a clean driving record and don’t expect to need repairs. A higher deductible usually comes with a lower monthly payment, so this can be a good way to save and avoid a lapse in coverage.

Reach out to your local insurance agent to ask about discounts.

You might qualify for low annual mileage discounts that could lower your car insurance rates. This is also a good time to check on general discounts, like those for good students, safe drivers, and vehicle safety features.

Don’t cancel your car insurance policy and risk a lapse in coverage.

Even though canceling your auto insurance policy could save you money short-term, it’ll be harder for you to find affordable car insurance rates long-term.

Don’t hide your financial concern from your car insurance company .

Many providers are willing to work with customers who are worried about a lapse in coverage. Sharing your struggles with the right people at your insurance provider or credit union might be one of the surest ways to help you avoid an insurance lapse. Many representatives are eager to offer advice and help out customers.

Lapse In Coverage: Our Take

While it’s important not to cancel your car insurance to avoid a lapse in coverage, it’s always a good idea to compare car insurance quotes from major providers available in your area to be sure you’re not missing out on better rates for the same coverage elsewhere.

Enter your zip code below to compare car insurance rates with free quotes instantly. Be sure to look out for policies from our top recommended providers, USAA and Geico.

Our Recommendations For Cheap Car Insurance

We researched the best providers in the car insurance industry. Two of our top providers are USAA and Geico, based on their reputation, customer service, coverage, cost, and more. Learn more about these two providers below.

#1 USAA Car Insurance : Best For Military Members

Our car insurance review revealed USAA as the best auto insurance for veterans, active military personnel, and their immediate family members. USAA customers get affordable rates and access to a number of discounts tailored for the needs of military motorists. The military installation discount gives customers who garage their car on a military base up to 15 percent off of their car insurance rates.

USAA offers standard coverage and other types of car insurance like:

• Roadside assistance
• Rental car reimbursement
• Accident forgiveness insurance
• Glass coverage
• Gap insurance
• Car replacement assistance

Read more about coverage in our full USAA auto insurance review.

#2 Geico Car Insurance : Best For Basic Coverage

Our Geico auto insurance review named Geico the Best For Basic Coverage. Geico is a household name in car insurance that provides customers with customizable policies and affordable rates.

Geico has many discounts available for safe drivers, government employees, good students, and more. Plus, Geico customers can customize basic car insurance policies with extras like mechanical breakdown insurance and rental car reimbursement.

Check out our Geico insurance review to learn more.

Does A Lapse In Coverage Affect Your Car Insurance Rates: FAQ

Here are a few frequently asked questions about how a coverage lapse affects car insurance rates:

What happens if you let a car insurance policy lapse?

Aside from penalties you may have to pay, the biggest risk of letting your car insurance lapse is being liable for damage or injuries if you cause an accident. Having to pay for these damages out of pocket could be a financial burden.

Does a car insurance lapse affect your credit?

Generally speaking, a car insurance lapse won’t affect your credit. An exception would be if you owe your provider for coverage when the lapse occurs. An insurer may report this debt to a collection agency.

How can you avoid a policy lapse?

The only real way to avoid a car insurance policy lapse is to pay your premiums on time. If you’re having financial difficulties, let your insurer know. You may be able to work out another payment plan.

How We Rate Auto Insurers

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.