Avoid a Car Insurance Lapse

The Importance of Continuous Coverage

A woman is adjusting the rear-view mirror before she drives.
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When your budget is tight, it's tempting to cut corners wherever you can. Auto insurance can be pricey, so you may consider letting it go. Or you might think you don't need insurance since you don't own a car. It's best to never let your car insurance lapse, though, even for a short period. Learn common reasons why car insurance policies lapse, why you should avoid a lapse if possible, and what to do if you have a lapse.

Key Takeaways

  • Without car insurance, you can be held personally liable in an accident, lose your license, or face high charges when you next buy insurance.
  • If you let your insurance lapse because you're not driving right now, you can still incur penalties or high costs when you start driving again.
  • If your insurance lapsed, ask to be reinstated by your insurance company or ask a friend or family member to list you as a driver on their policy.
  • Some exceptions to car insurance requirements exist for military members, new youth drivers, and drivers with continuous motorcycle insurance.

Why It's Best to Avoid an Auto Insurance Lapse

Auto insurance can lapse for several reasons:

  • You forgot to pay your bill.
  • You don’t have the money to pay your bill.
  • You sold your only car.
  • Your only vehicle broke down.
  • Your only car was in an accident.

The consequences of canceling your auto insurance can be severe. It can be especially dangerous if the cause of the lapse is related to money. Forgetting to pay your bill or not having the funds implies you may still be driving your vehicle. If that's the case, serious problems can arise if you're in an auto accident.

Without insurance, you can be held personally liable in an accident. There are hefty fines in most states if you’re caught driving without insurance. You’re considered high-risk the next time you purchase insurance, which can nearly double your payments. Even if you let your insurance lapse because you're not driving right now, you could still incur penalties when you start driving again.

Look for ways to avoid a lapse. Car insurance should be high on your priority list. Borrow money from a family member, sell some items, or use a credit card to make your payment. Reduce coverage, talk to your agent to find out ways to save on your policy, or shop for lower rates if your insurance is eating too much of your budget.

If you're without a car for a time, see if you can be listed as a driver on a family member’s policy. If you’re transitioning between vehicles or your car is out of commission due to repairs, carry insurance on your old vehicle until you make your new purchase or repair your vehicle.

What to Do if You Have an Insurance Lapse

If your insurance lapsed, you have two options:

  • Call the company or agent where you had your coverage and request reinstatement
  • Ask to be listed as a driver on a family member or friend’s policy

If you haven't lapsed before and haven't recently had multiple claims, you have a good chance of being reinstated. Reinstatement is when your original policy is put back into force. Depending on how long the lapse has been, you may be able to get it reinstated without a pause in coverage. You may be charged additional premiums for lapsing, but it will still be cheaper than going with a high-risk carrier.

Being listed as a driver on a family member or friend’s policy is a great option for someone without a vehicle.

As long as you're listed as a driver on an insurance policy, you won't be treated as high-risk when getting insurance in your own name.

Exceptions to Letting Insurance Lapse

There are only a few reasons to go without insurance, and most of the exceptions come with stipulations. These include:

  • Military employees
  • Newly licensed youth drivers
  • Drivers maintaining continuous motorcycle insurance

Service members can obtain insurance without prior coverage due to deployment or training on base. Newly licensed youth drivers may have a difficult time finding coverage with a preferred carrier on their own, so it's best to start by being listed on a parent's insurance policy.

A motorcycle rider may be able to drop vehicle coverage by getting preapproval from their auto insurance carrier. Exceptions for motorcycle riders came about due to drivers downsizing to motorcycles. However, don't expect this strategy to work with every carrier.

When money is tight, it might seem like a good idea to cancel your car insurance, but it rarely is. Driving without insurance is against the law in most states, and it can also be very costly.