A lapse in car insurance is the period when a registered car is without coverage. Like all types of insurance policies, car insurance requires the policyholder to pay premiums. Premiums are payments made in exchange for coverage of your vehicle, should any damages or losses occur. These payments are made periodically, usually monthly, to the insurance company. Failure to keep up with payments can lead to a policy cancellation, leaving you without coverage. Other reasons why your auto coverage could lapse include deployment, you no longer drive, etc.
Most insurance providers notify the policyholder when their auto coverage is about to expire. You are to respond with the next line of action: renew or cancel the plan. It is never a good idea to let your car insurance lapse because it can have several disadvantages, such as higher premium rates, fines, and lack of protection in the event of an accident.
Let’s take a look at some of the disadvantages of a lapse in car insurance:
The penalty for a lapsed coverage varies from provider to provider, but generally, it leads to higher premium rates. If you are informed about a lapse in your car insurance, responding in time can be helpful because some providers may forgive the lapse if it has been only a day or two. However, providers tend to view policyholders with lapses as high-risk; hence they may be charged higher premiums. You cannot afford to forget to pay your premiums, as a lapse will go on your record and can ruin your savings and disqualify you from certain discounts.
Some states have legislation requiring a minimum level of liability insurance for all drivers, so failing to meet this requirement can attract serious consequences. Part of the consequences may be to pay a sum of money or to carry an SR-22.
What Can You Do to Avoid the Lapse?
Use these methods to avoid a lapse in your auto insurance coverage:
Set out a budget for your auto insurance payment – One of the most effective ways to ensure that your payments are never late is to use the auto-pay option. Consider having your premiums automatically deducted from your account at the end or beginning of each month when you receive your income.
Reduce the cost of your premiums – Do not just settle for the first provider you come across; instead, take your time to shop around. This will allow you to compare quotes and settle on a good but less expensive insurance company. You can discuss with your provider the ways to lower your rates, like discounts and bonuses. Low-risk policyholders tend to get lots of discounts, so maintaining a good driving record and car safety installations can go a long way in lowering your premiums.
Inform your insurer immediately if you sell, scrap, or take the car out of service – Do not stop paying premiums without first informing your provider. If there’s a legitimate reason why you have to discontinue payments, call your agent and tell them. Leaving your policy to go into cancellation can put you in the high-risk class, which makes it difficult the next time you try to buy insurance.
What Can You Do If It Does Lapse?
- Try everything within your power not to get behind the wheels throughout the lapse period. It is best to avoid driving until everything is sorted out to avoid penalties.
- A quick reaction can go a long way, so call your insurance company to know if they can forgive you a few days’ lapse.