Everyone hopes to never find themselves in a situation where they can’t afford their auto insurance premium. However, it’s important to be prepared and understand the consequences if it does happen. In this article, we will discuss what happens if you don’t pay your car insurance and provide steps you can take to minimize the negative effects of a coverage lapse.
Understanding Auto Insurance Premiums
Before we dive into the consequences, let’s quickly explain what auto insurance premiums are. These are the monthly payments you make to your insurance company for your car insurance policy. Your rate is determined by several factors, including your driving record, age, location, type of car, and how often you drive. You have various payment options, such as monthly debit order, cash payment, or mailing a check. Some companies even offer discounts if you pay your annual premium upfront.
Consequences of Skipping Payments
Reminder and Late Payment Fees: If you miss a payment, expect to receive a reminder from your insurance company. They may also charge you a small late payment fee.
Lack of Coverage: Policygenius warns that missing a payment can result in a lack of coverage for any damages incurred while your account is past due. This means you would have to pay for any accident or car damage out of pocket. Additionally, not meeting the minimum coverage requirements set by your state can lead to fines and penalties if you are pulled over.
Potential Premium Increase: Missing a payment could lead to your insurance company canceling your coverage. When you apply for a new policy, you may have to pay more due to the coverage lapse. New insurers consider your insurance history, and seeing missed payments may view you as a risk, resulting in higher premiums.
Collection Agency Involvement: If you continually fail to pay, your insurance company may involve a collection agency. Having a debt in collections can negatively impact your credit score, making it harder to make significant purchases, acquire loans, or apply for credit cards.
Risk of Vehicle Repossession: If you are leasing a vehicle or have a loan, your lender will likely require insurance coverage. Failure to make insurance payments could result in the lender repossessing your car.
Grace Period and Policy Reinstatement
In most cases, insurance companies provide a 10-20 day grace period before canceling a policy for late payment. If your policy is canceled, your insurer may reinstate it once you have cleared all outstanding payments.
Steps to Take When Your Policy Expires
If your coverage lapses due to non-payment, it’s crucial not to drive your car until you are insured again. Here’s what you can do:
Contact Your Insurer: If it has only been a few days since your policy was canceled, call your insurer to discuss a payment plan and ask if they can reinstate your policy.
Shop Around: If you’ve been without insurance for an extended period, it may be challenging to find coverage or you may face high premiums. Talk to different insurance companies to find the best options. Mention the reason for your coverage lapse and inquire about possible discounts.
Rate Recalculation: Once you have obtained coverage again, ask your insurer to recalculate your rates after six to twelve months of consistent premium payments without filing a claim.
Remember, it’s crucial to be proactive and address any coverage lapses promptly. Keep yourself informed about your insurance policies and payment deadlines to avoid these situations altogether.