What does it mean to let your car insurance lapse?

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Here's what you need to know...
  • A car insurance lapse is a gap in coverage where your car insurance benefits aren’t valid
  • The most common reason that an insurance policy lapses is when you don’t pay your premiums by the due date
  • A majority of the larger auto insurance carriers have a grace period that gives their clients between three and ten extra days to pay their premiums
  • If you’re guilty of material misrepresentation or you no longer meet the company’s underwriting guidelines, your policy may be canceled by the carrier
  • Drivers who are cited for a lapse of coverage could face serious penalties for violating their state’s auto insurance laws


Auto insurance is one of those intangible products that you need to buy but that you don’t really want to use.

Since you have to experience some sort of incident to use your policy, your coverage is really just protection that offers you peace of mind until disaster strikes. Unfortunately, if disaster strikes during a lapse, you could be in trouble.

An auto insurance lapse is defined as a gap in coverage where the policy has been terminated and no coverage is afforded. A lapse can either last for a couple days, a couple weeks, or a couple of months depending on the situation.

The longer the lapse, the more you’re at risk. Here’s what you need to know about policy lapses and the consequences you could face if your insurance cancels.

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Auto Insurance Premiums Are Paid in Advance

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When you’re buying an insurance policy, it’s important to understand how billing cycles work.

Unlike some other services like gas, water, and electric which bill you after the service dates, you’re billed in advance for the coverage that you’re afforded by an auto insurance carrier.

If you’re wondering why you pay insurance before you use it, consider how coverage works. If you were to pay for coverage after the fact, it’d be easy to cancel your policy if you didn’t have a claim.

By requiring clients to pay in advance, policyholders have a reason to avoid lapses in coverage.

Most Common Reasons That Auto Insurance Policies Lapse

There’s a bunch of reasons why a policy could lapse. While most of the scenarios are within your control, there are scenarios to consider that are beyond your control as well.

If a lapse can be avoided, it’s best to do so. Here are the common reasons that standard policies lapse:

How long do you have to pay your auto insurance premiums?

Auto insurance companies often offer their clients several different billing schedules. You may have the option to pay monthly, quarterly, semi-annually or annually, depending on the carrier.

If you pay in any type of installments, it’s your duty to make your payment by the due date at 12:01 am or your coverage could cancel.

Even though your bills have a very specific due date, many companies are nice enough to give their customers a little wiggle room when it comes to submitting payments.

Just like lenders offer grace periods, larger insurance companies also do. If the payment isn’t submitted by the end of the grace period, the policy will lapse at 12:01 am the next morning.

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How long is the typical grace period?

There’s not a universal grace period that all insurance companies offer. If you know you’re going to be late paying your premiums, you should check with the insurer beforehand to see if there’s some type of arrangement that can be made.

In most cases, grace periods are only three to ten days. Generous insurers offer grace periods as long as 30 days.

Don’t Rely on Grace Periods at Renewal

Grace periods apply for installment payments but not necessarily for renewal payments. A car insurance renewal is a new period where you’re charged a different rate.

To continue your coverage, you need to make your initial renewal payment. While not all companies require this, it’s best to check before you make assumptions.

What are the penalties for letting your car insurance lapse?

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Driving without insurance is a serious offense in states with mandatory auto insurance laws.

If you’re guilty of accidentally or purposefully missing a payment, you could face some serious and costly penalties.

While many of the consequences are monetary in nature, not all of them are. Here are some of the most common penalties assessed:

  • A fine of up to $500
  • A fine of up to $2000 for multiple offenses
  • Suspension of your registration
  • Suspension or driver license for up to 90 days
  • Mandatory vehicle impound for 30 days and impound fees
  • Imprisonment of not more than six months
  • Mandatory court appearance and community service

Are there other consequences that don’t involve the state?

The last thing that you want to do is get in legal trouble for failing to buy auto insurance, but the legal trouble isn’t the only type of trouble that you could get into.

Some of the other consequences that you could face could change your life. Here are other headaches you could face for letting your coverage lapse:

  • You could have an uninsured accident and lose your license for up to one year
  • You could be taken to court to pay for damages sustained in an uninsured loss
  • Your wages could be garnished or your assets liquidated
  • Your employer could terminate you for no insurance convictions
  • Your rates could go up

If you have an insurance lapse, now’s the time to find coverage. Use an online rate comparison tool to see how much you’ll pay for a new policy. Choose which auto insurance policy is best for your budget and bind your coverage today.

Our online comparison tool is FREE, so just enter your zip code to get started!

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