A car insurance lapse occurs when your car insurance expires before you renew it. Without insurance you can't legally drive your vehicle on the roads. This means that if you let your car insurance lapse, you have a problem until you reinstate it or obtain new insurance. It's important to be aware of all the implications of what can happen when you let your car insurance lapse.
Step 1 - Important Information
Your car insurance expires on a specific date. Usually you'll receive a renewal notice about a month before that. This gives you a chance to renew your insurance or look for another company with which to do business. That expiration date is final. You'll find that the insurer won't offer you a grace period for renewal. As soon as the date has passed, you're without insurance if you haven't renewed your policy or found an alternative.
That said, with some insurance companies, you will find a grace period before a car insurance lapse. It's always best to work on the assumption that your company doesn't offer this.
Step 2 - Penalties
In most states, you'll find that driving without insurance can bring several penalties. In addition to a fine, you might also find that your license is suspended, you'll have to pay court fees and you could end up with your car registration suspended. In some states, your vehicle can even be impounded if you're caught driving without insurance.
When you apply for new insurance, you'll have to disclose the offense and it could leave you in a high risk category. That would mean you'd be paying a great deal more for your car insurance.
Step 3 - What to Do
If you don't want car insurance, or if you can't afford it, there are steps you can take. Exactly what they are will vary from state to state. With car insurance cancellation, you'll need to hand your license plates and registration back to the DMV. This will stop you receiving any penalty for not having your vehicle insured.
You can't park your vehicle on a public road without plates or registration. If you do that, you'll be fined and your vehicle might be towed. When you're ready to obtain insurance again, the cancellation of your policy will mean that your premium will be higher.
Step 4 - Reinstatement
You can reinstate your car insurance with the same company after a car insurance lapse. You need to be aware that you'll be on record as having had your policy cancelled for non-payment, and this will count against you.
It means that your quote will be a great deal higher than it was before. The same will apply with switching car insurance to other companies, as the information will be on a central database. Obviously, the best thing you can do is not to allow a car insurance lapse. It's going to cost you money.
If it has lapsed, take the time to shop around for new insurance. You can do this easily on an insurance comparison website. Be truthful when answering the questions, including your car insurance lapse. If it's discovered later, the company could cancel your new insurance.