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What happens if your car insurance lapses?

If your car insurance lapses for any reason, the state may take away your driving privileges and fine you to reinstate them, even if you weren’t caught driving. That’s because if you have a vehicle registered under your name, the state assumes you’re driving it. And in almost every state but New Hampshire, driving without a minimum level of liability insurance is against the law.

Because uninsured drivers have become such a costly problem -- nationally one out of every eight drivers doesn’t carry insurance -- states are increasingly using electronic reporting systems to find out directly from insurers when a vehicle owner is past due on his bill. If that happens, you may not be charged with the crime of driving while uninsured, which can carry steep penalties. But in nearly every state you will have your registration, driver’s license, or both, revoked and then be charged anywhere from an $8 daily fee to an immediate $250 fee to reinstate them. The DMV fees listed below are only for those portions of the costs, and do not include criminal fines, court fees or other costs associated with driving without insurance. 

Below is the Texas fee charged by the DMV when they’ve learned that a registered vehicle owner hasn’t paid his vehicle insurance.

Texas: Reinstatement fee of $100

Can I keep my license plates and car registration during an insurance lapse?

To avoid these penalties, always turn in your license plates and cancel your registration if you plan to have a lapse in car insurance. Better yet, contact your insurer, who is likely to work to keep good customers. Insurers are supposed to give you a 30-day advance notice before canceling your policy.

"If you miss a payment, the important thing to do is get in contact with them right away," says Bob Passmore, assistant vice president of personal lines policy for the Property Casualty Insurance Association of America. “So you’ll get a lot of opportunities to make it right.

Is there a grace period for car insurance?

No, there is not a grace period. If you don’t pay your car insurance bill by the due date, your coverage is canceled right away. That means you are not covered if you have an accident or your car is damaged, and will be responsible for paying for medical bills, vehicle repairs and property damage.

How much will my rate go up if I have an insurance lapse?

If you still want to suspend coverage, keep in mind that even if you follow the law and submit your plates, you still may be charged more for insurance after you’ve had a lapse of, say, more than 30 days. Insurers say their statistical models show that drivers who haven’t carried steady, uninterrupted insurance coverage tend to file more claims, and so cost the insurance company more.

Some insurance companies won’t even take customers who can’t show six months of prior coverage, forcing drivers to shop from high-risk providers for as much as double the price. “If you’re in that situation, there a lot of companies that specialize in high-risk drivers,” says Passmore. “Shop around. They might only charge more for six months.

That said, some states don’t allow insurers to charge more if a lapse was due to overseas military service, hospitalization or job loss.

Get a quote here if your policy has cancelled 


Posted 12:04 AM

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