Given the legal requirement for car insurance, having your policy lapse is just not an option. However, life happens. For one reason or another, we fail to renew or purchase a new car insurance policy in time. Lapsed auto insurance can have serious implications for drivers, including fees, fines and license suspension. The worst that can happen is that you are at fault in an accident when you have lapsed car insurance.
The good news is that you can address this situation, although it may just be a case of damage control. If you are just a few days late on your payment, some insurers might allow you to reinstate your policy. However, although your insurer reinstates the policy, it cannot cover you retroactively. This means that your policy date would be the date of reinstatement and not your previous due date.
When your car insurance premium is due, you should receive notice from your car insurer. If you did not receive that notice, the Department of Motor Vehicles should inform you that your auto insurance has lapsed. Normally, the notice from the D.M.V. would include an indication of auto insurance gap fees that you incur based on your lapsed policy. Further inaction on your part could lead to suspension of your driver’s license or charges for driving without insurance, which is illegal.
Once you respond in a timely manner and purchase your new car insurance policy or reinstate your existing one, you might find that your car insurance premium is affected. This is because a lapsed insurance premium negatively affects your credit rating and insurance history. In addition, if you fail to disclose to your new insurer that your previous policy lapsed, your insurer may cancel or terminate your new policy for non-disclosure.
Sometimes, depending on the auto insurance gap and severity of the penalties, it may be difficult to purchase a new car insurance policy. In this case, you should have the option of your State’s Automobile Insurance Plan. This is a safety net for those whose insurability is severely affected by the lapsed car insurance.
It is also important to prevent gap coverage by making sure that you are always covered, even if you plan to terminate or not renew an existing car insurance policy. To prevent your policy from lapsing in future, it is important that you have a reliable means of being informed by your car insurer when your premium is due.