How Does a Lapse in Car Insurance Coverage Affect Rates? – ValuePenguin
having an expiration on your car insurance automatically makes you a potential risk for insurance companies. For insurers, this type of risky behavior increases the probability of having a car accident.
As a result of a gap in coverage, your insurer will likely increase your rates. based on our analysis, drivers with a coverage gap of 30 days or less experienced an average auto insurance rate increase of 8%. and those with a coverage gap of more than 30 days saw an average premium increase of 35%.
Reading: What does lapse in car insurance mean
Because you’ll likely pay a hefty markup on auto insurance if you let your policy lapse, it’s essential to avoid having a gap in coverage, even if you’re only maintaining the absolute minimum amount of coverage.
We always recommend that drivers compare quotes from multiple insurers to find the best rates for auto insurance.
how much will car insurance rates increase after a lapse?
The penalty for auto insurance lapsing is quite small if the lapsing is short (an 8% increase in premiums for lapsing less than 30 days), but much higher if the lapsing is longer (an increase of 35% for 31 days or more).
To get an idea of how much rates would increase, we compiled quotes from three major national insurers: Allstate, State Farm, and USAA. our sample profiles included drivers who still have current insurance and those who have let their policy lapse in increasing increments of 15 days, up to 60 days.
The results show the importance of having an auto insurance policy again as soon as your previous plan ends. Unsurprisingly, the longer you wait to get your insurance policy back in force, the higher the penalty you’ll pay.
There appears to be a small penalty for drivers with a policy expired less than 30 days, but if you let the lapse extend any longer, the penalty can increase dramatically to an average increase of about 35% per year. That can translate into hundreds of dollars you could overpay.
In our sample, usaa increased fees by the smallest amount, while state farm had the largest penalty. however, the price you pay for car insurance is affected by a wide variety of factors, including where you live, your age, and your driving record.
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Again, we always recommend getting quotes from multiple insurers, as comparing rates can be one of the best ways to find auto insurance savings.
what should you do if you have a coverage gap?
If your auto insurance accidentally lapses, start by calling your current insurer. while not a guarantee, they may be able to reinstate your policy with minimal consequence, especially if it’s only a span of a few days.
If your insurer requires you to get a new policy, it’s worth shopping around for a better price. But do it fast: The longer you go without car insurance, the more likely you’ll be fined once you restart it.
The one thing you should never do is drive without insurance. Driving without insurance is dangerous and illegal. Consequences vary by state, but common penalties for driving without insurance include losing your license and having your car impounded. If you are involved in an accident while driving without insurance, you could even face jail time. If you don’t have insurance and need to drive your car, you need to re-purchase an insurance policy.
Of course, that’s easier said than done if you can’t make your auto insurance payment. We always recommend checking with multiple insurers to find an affordable rate. you may be able to save even more by qualifying for additional discounts or reducing the amount of coverage you have.
best insurers for lapsed car insurance coverage
we found among our sample insurers that ee. uu. had the lowest change in rates for a driver with an insurance lapse, as well as the lowest prices overall: a driver with a 60-day lapse policy can see as little as a 9% increase with us .
on the other hand, allstate, while the most expensive option overall for our sample driver, did not increase rates at all over a 15 or 30 day period. this is why shopping for the lowest rate is essential when shopping for car insurance.
what is a car insurance expiration?
a span can be as short as a day; if there is any period when you are without auto insurance, that counts as a lapse. however, some insurers may not penalize you for a short period of less than two weeks. There can be several reasons why you experience a lapse: your policy ran out, your policy was canceled because you missed a payment, you no longer drive, you were deployed, and many more.
if your policy ends due to late payment or you forget to renew the policy
A common scenario is that you missed a monthly payment or forgot to renew your policy after it expired, leading your company to cancel the policy. Once your policy is no longer in force, your auto insurance company can notify the DMV that you are uninsured.
Depending on the state, not having insurance can expose you to fines and many other penalties. the longer you wait to renew your policy, the more expensive your rates will be.
if you are stationed abroad or studying/moving abroad
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If you’re stationed abroad, you probably won’t be using your car much. the same goes for those who live or study abroad for a period of time. The military has some companies, like usaa, geico, and esurance, that allow them to suspend car insurance while they’re away.
Discontinuing insurance is not considered a lapse and can save you from high rates. if you are studying or moving abroad, you will need to obtain an affidavit from your state dmv stating that you will not use the vehicle.
If your car is financed through a lease or loan, you may not have the option to drop coverage. if suspension is not possible, you can drop the policy (if there are others in it) or cancel your insurance. Unfortunately, that would be considered a lapse and leave you open to hefty rates from your insurance company. however, you may be able to avoid any state and dmv penalties by completing a dmv exemption form.
Which states impose a coverage gap penalty?
if you have a registered vehicle, you need auto insurance in almost every state in the us. uu. Some states are better than others at regulating that, even going so far as to make companies report to state DMVs whenever insurance on a registered car expires. When the DMV finds out about your lapse, you are subject to license and/or registration suspension, civil penalties, and SR-22 filings, among other penalties.
Please note that these fees only relate to letting your insurance lapse. If you’re caught behind the wheel without proper insurance, you’ll likely face even harsher consequences.
Here’s what you can expect from each state:
Some states have harsher penalties than others, but the bottom line is that you should never let your car insurance lapse. At a minimum, you’ll likely see an increase in your car insurance rates and also face significant legal penalties.
how do insurers find out if your insurance lapses
When you get a quote for auto insurance, you’re usually asked if you have coverage. If you’ve let your insurance lapse, be honest: Auto insurance companies don’t just take your word for it.
Auto insurers work with state DMVs to maintain accurate databases of who has auto insurance and when. So while you may be able to get a cheaper quote by ignoring the fact that you had an insurance lapse, your insurer will find out eventually.
At best, the result is that your insurer will simply increase your rates to what you would have paid had you been telling the truth. but it is also possible that your insurer may choose to cancel your policy, leaving you in the same situation as before, but with two lapses instead of one.
valuepenguin’s analysis used insurance rate data from quadrant information services. These rates were obtained publicly from insurer filings and should be used for comparison purposes only; your own quotes may be different.