How Much Will a Lapse in Car Insurance Coverage Cost You?

INSURANCE - CAR INSURANCE
A lapse in your car insurance coverage will cost you in more ways than one. Make sure you know how to handle one.
Updated Sept. 26, 2023
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Although making car insurance payments can sometimes squeeze your budget, not paying your insurance could cost you more in the long run. First and foremost, if you’re going to drive, nearly all states legally require you to carry insurance. And you’ll likely face increased premiums when you do eventually get coverage again. The longer you wait, the more your premiums are likely to increase.

Learn more about what happens if your car insurance lapses, how much your premiums are likely to increase and what you can do to get coverage back.

In this article

What is a lapse in coverage?

A lapse in insurance coverage occurs when you drop or lose coverage for a time. While the exact time period will be defined by your own car insurance company and your state, in general, a 30- to 60-day gap in coverage is considered a lapse. If you drive without insurance, you may be subject to fines, a driver’s license suspension, or be subject to other penalties.

A lapse in coverage is usually due to nonpayment. If you fail to pay your insurance premiums, your insurance company will discontinue your policy. Thankfully, insurance companies typically don’t immediately cancel your policy if you’re a few days late.

Most auto insurance companies offer a car insurance lapse grace period. This gives you a few extra days after your payment due date to pay. You may face a late payment fee, though. Make sure you contact your insurer as soon as you realize you’ve missed a payment to ensure your policy is still in place.

What are the consequences of a lapse in coverage?

The only states that don’t require car insurance coverage are New Hampshire and Virginia, and the states that do require it keep tabs on drivers. Insurance companies work with local departments of motor vehicles (DMVs) and report when customers lose their policies.

In the event that you’re uninsured, the following may happen:

  • You won’t have insurance in the event of an accident. There is a reason drivers have a car insurance policy. Car accidents, however small, can be extremely expensive. Insurance helps eliminate the brunt of this cost and could help pay for medical bills and property damage.
  • You could lose your license. Not having your state’s minimum insurance could cost you your license.
  • Your insurance rates will likely increase. Insurance companies don’t like it when you have a lapse in your coverage. If and when you reinstate your policy, you’ll likely end up with a rate increase.
  • You could get potential jail time. The first time you’re caught without insurance, you may get a fine, but you’re unlikely to face jail time. Repeat offenders may eventually face a short jail sentence, however, depending on their state.
  • Your vehicle could be repossessed. Drivers with loans or leased vehicles could have their vehicles repossessed if they lapse on insurance coverage. When you take out a loan or lease, lenders require that you maintain insurance — typically comprehensive and collision in addition to liability. If you fail to keep your side of the deal, your car could be taken away since you’ve broken a legal agreement.

Warning
If you lose your license due to not maintaining insurance, the largest fee you’ll pay is a license reinstatement fee. The fees vary from $50 to a couple of hundred dollars and often go up the more penalties you have. Additionally, you may be required to have an SR-22, which is a statement that says you have your state’s minimum insurance.

How much does a lapse affect insurance rates?

It’s difficult to pinpoint an exact amount by which a lapse in coverage will raise your car insurance rates, but you’ll likely pay more for insurance once you get it reinstated. And the longer your lapse was, the more your rate will increase. You may be considered a high-risk driver, and some insurance companies may even decline to insure you.

How to deal with a lapse in coverage

When you realize you’ve lost your insurance due to non-payment, you need to act fast to avoid potential fines, late fees, and potential repossession of your car.

Here are a couple of steps to help you get your coverage back.

Immediately call your insurer to reinstate coverage

First, call your insurance company. If you have an insurance card, your provider or agent’s number should be listed there. Or you could do an internet search for your insurer’s customer service line. Explain to them that you understand you’ve lost your coverage and want to discuss getting it back. If you’ve just missed a payment, paying that right away may get you back in the good graces of your insurance company.

Warning
Insurance companies are required by state law to provide you notice before canceling your policy. If you receive a notice, act quickly to make your payment and avoid dealing with a coverage lapse.

Only maintain the coverage you can afford

If you no longer have auto insurance coverage because you couldn’t afford your car insurance premiums, there are ways you can lower the monthly cost. Yes, you may pay a little more because you let your policy lapse, but if you drop the more expensive coverage you have, your premium could go down enough so that you can afford it going forward.

For example, if you own your car outright and aren’t required to have collision and comprehensive coverage (also known as full coverage), consider dropping these. While you won’t have as much coverage, you’ll still meet state minimum requirements.

Tip
Liability coverage is required in most states. Some may also require medical payment coverage, personal injury protection, and/or uninsured/underinsured motorist coverage.

Of course, before making this decision, consider the car you have. If you have a newer car and you get into an accident, you’ll have to pay a lot more out of pocket to repair or replace it than if you’re driving an old clunker. Again, ask your insurer how you can lower the price of your policy. You could also increase your deductible or lower your policy limits, but again, these could lead to higher out-of-pocket costs in the event of an accident.

Get quotes for cheaper rates

Some insurance companies are stricter than others. If you’ve found that your insurance company isn’t willing to work with you on your premium after a lapse in your policy, consider switching to a company that understands and getting a new policy.

FAQs

Does an insurance lapse affect credit?

Technically, no, the actual lapse in insurance won’t have an effect on your credit score. However, if you cease making payments on your auto insurance and those debts are turned over to collection agencies, this could have a negative impact on your score. Collection agencies report these delinquent payments to the credit bureaus, who note it on your report for future lenders to see.

How do I get around my insurance lapses?

There’s no getting around a lapse in insurance. Lapses occur only after you haven’t paid for an extended period of time. Before your policy officially lapses, your insurance company is required to contact you to let you know. If you choose to ignore these calls, you’ll need to take the proper steps to reinstate your insurance.

Getting your insurance reinstated largely involves contacting your insurance company and paying any late bills.

What is the penalty for not having car insurance?

Letting your auto insurance policy lapse is a fairly big offense in the eyes of the law. Your exact penalty will differ depending on the state you live in. In general, you’ll have to pay a fine, and your state may suspend your license. If you have multiple offenses, you could end up serving jail time as well.

Bottom line

A lapse in your insurance is likely due to missed payments on your part. The very best way to avoid this is to sign up for automatic payments with your insurance provider, if available, and only secure a policy you can truly afford. While it’s nice to have as much coverage as possible, if it’s going to potentially cause you not to pay, it’s not worth it.

If you have a lapse in coverage due to a missed payment, you may be able to correct the problem before it affects your rate. Having a short lapse is better (and cheaper) than a longer lapse. If it’s been a while since you’ve had coverage, don’t continue to ignore the problem. Get a few insurance quotes from the best car insurance companies to see who might offer you the best price.

  • You could save up to $500 with some companies
  • Compare dozens of providers in under 5 minutes
  • Fast, free and easy way to shop for insurance
  • Quickly find the perfect rate for you

Author Details

Christopher Murray Christopher Murray is a seasoned personal finance writer with a passion for empowering individuals to achieve financial independence while embracing sustainable practices. Over the last few years, he has focused on various facets of personal finance—specifically saving, budgeting, investing (with an emphasis on alternative investments), credit building, and sustainability.

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