What does it mean to have lapsed car insurance? A lapse in insurance can happen for several reasons. Maybe you forgot to pay the premiums or your insurance company dropped your coverage for some reason. Having lapsed insurance isn’t uncommon, but it’s best to avoid it if you can.
If you continue to drive despite having an expired car insurance policy, you run the risk of being fined and losing your driver’s license. In the event of an accident, you won’t have help paying medical bills or property damage. You may also find it difficult to obtain affordable insurance after letting your current policy lapse.
Furthermore, lapsed car insurance can have some costly and annoying consequences that you may not expect.
Here are some questions you should be asking if you’ve considered letting your car insurance lapse. You may decide that it is not a good idea after all.
Should I Cancel My Car Insurance or Let It Lapse?
You can cancel your car insurance at any time. You may get a partial or full refund of any premiums you prepaid. However, if you cancel the policy, it may result in extra fees and higher rates. Some insurers charge a cancellation fee, so be sure to check first.
People need to cancel insurance for many reasons such as:
- Moving to another state – Not all insurers offer policies in all states.
- Found a provider with lower rates – This is a common occurrence.
- Dissatisfied with the insurer’s customer service – Some companies are slow to pay claims or are difficult to reach.
- Selling the car – Some individuals sell a car and don’t plan to buy another one.
If you decide to cancel your car insurance, keep in mind that you may need to use this insurer again, so you don’t want to leave on bad terms. It’s best to contact them and follow their cancellation requirements rather than just letting the policy lapse.
Is There a Grace Period for Lapsed Car Insurance?
It’s not uncommon to miss a car insurance payment, but it can cause some difficult consequences. It won’t be as simple as paying a late fee.
State laws require insurance companies to notify you before canceling your policy. Depending on where you live, you may have up to 30 days to pay the late payment to avoid a lapse in insurance.
If you cancel your insurance because you found lower rates with another company, make sure there is no lapse in coverage. You should start your new policy a few days before you plan to cancel your current one. Even a one-day lapse in coverage can result in difficult consequences.
Can I Renew or Reinstate My Lapsed Car Insurance?
If your car insurance lapsed due to late payment, call the insurance company right away. If it hasn’t been too long, they can likely reinstate your insurance.
In most cases, renewing your insurance after it has lapsed or expired will result in higher premiums. Also, any bonuses or discounts you’ve earned may be lost.
Can My Car be Repossessed if My Insurance Lapses?
Driving a financed automobile requires you to carry vehicle insurance at all times. The lender will likely require comprehensive and collision coverage in addition to liability and other required coverages. You may also be required to carry uninsured motorist and gap insurance as well.
All lenders require you to have adequate insurance on the vehicle they financed. If you drop the coverage before the loan is paid off, the lender can begin the process of repossessing the car.
Some lenders will place mandatory coverage on the vehicle if you let your insurance lapse. However, the coverage is much higher than regular insurance and will be added to the balance of your loan.
What Is Required to Reinstate a Lapsed Car Insurance Policy?
Most insurance providers have specific car insurance requirements for reinstating a lapsed policy. But, if the policy has lapsed for more than 30 days, they may refuse to reinstate it.
Some of the requirements for reinstating a lapsed car insurance policy are:
- Pay the premiums you owe, including a penalty or interest.
- Do not drive the vehicle until the policy is reinstated.
- Sign a “no loss statement” to certify that you haven’t had an accident or other loss and will not file a claim during this time.
Generally, there are two types of reinstatements:
- Reinstatement without a lapse – Helps you maintain state requirements, comply with lender requirements, and build a positive history with the insurance provider.
- Reinstatement with a lapse – The policy is reinstated on a date that comes after the date on the canceled policy. This results in a coverage gap and can harm your insurance history.
Need Affordable, Trusted Car Insurance? Sandifer Insurance Agency Can Help
Now that you know the difficulties relating to lapsed car insurance, your goal should be finding an insurance company that is affordable and trustworthy. Sandifer Insurance Agency will help you find the right auto insurance for your needs and budget.
Sandifer Insurance Agency will make sure you stay protected and in compliance with state laws. We work with America’s top insurance companies and have over 40 years of experience in the insurance industry. These are two good reasons to give us a call today.
Contact us by phone, email, or online to find out how easy it can be to find the best auto insurance available.