How Does a Lapse in Car Insurance Coverage Affect Rates?

A lapse in your car insurance is one of the surest ways to increase your insurance rates or even get rejected by major car insurance companies. So what is a lapse in auto insurance coverage, and how to avoid it? 

Let’s look at everything you need about car insurance coverage lapse. 

What is Lapse in Car Insurance Coverage?

The definition of a car insurance coverage lap is very simple. It is a period when you have a car or any vehicle registered in your name but no active auto insurance policy. 

So you might own a car, but you do not own any car insurance policy for it. No liability coverage, collision coverage, comprehensive insurance, uninsured motorist coverage plan, etc. 

Almost every state requires drivers to have at least liability coverage that covers the cost of car repairs and medical treatments of the other driver involved in the car accident caused by you. 

Twelve states in the US require drivers to have a personal injury protection plan, while 14 other states require drivers to carry uninsured motorist coverage. It is illegal to drive a car without state-mandated car insurance coverage. 

Now that the definition of car insurance coverage lapse is clear, let’s see how a lapse affects your car insurance rates.

Lapse in Car Insurance Coverage,c
Credit: The Guardian Nigeria

How Does Lapse Affect Insurance Rates

As mentioned, driving a car without the required auto insurance policy is a felony. And a lapse in a car insurance policy means owning and operating a car without the required policy. 

A coverage lapse can insurance your insurance rates by a huge margin. Not just that, but coverage lapses that last for too long can result in you being ineligible for reinstatement. So it is very easy to see why car insurance companies dislike coverage lapses. 

For example, in most states, a coverage lapse of fewer than 30 days resulted in a price hike of around 10%. 

Now, when the 30-day mark is crossed, things take an uglier turn. Coverage lapse that lasts more than 30 days and under 60 days or two months resulted in an increase in insurance rates by almost 60%. 

Coverage lapse of more than 60 days will most certainly get you ineligible for any car insurance policy by almost all the major car insurance companies. So the bottom line is that do not get coverage lapses in your car insurance policy if you want to save money. 

Another way of saving money is by making the right choice by buying car insurance. It means you need to find a car insurance provider before making a purchase. 

For example, if you live in Illinois. The best way to find the best car insurance in your state would be by searching for cheap car insurance in Illinois and selecting the best coverage at the most affordable price.  

Reasons Why Insurance Lapse Could Happen

There are many reasons why an insurance lapse could happen. Whatever the reason, policyholders must always be on alert to avoid lapses. Here are the reasons someone might own a car but not an insurance policy, albeit for some period. 

Failing to Pay Insurance Premiums

Failing to pay car insurance premiums is perhaps the most common reason for lapses in coverage. The reasons someone would not pay the premiums can vary, ranging from the inability to get the premium to just forgetting the payment is due. 

Denial of Renewal Due to Excess Claims 

Excessive insurance claims or violations of the insurance company’s policy terms can result in the insurer denying to renew your insurance. Insurance companies have strict rules regarding the number of policy claims. 

Make sure you read the document and the conditions properly. Talk to your insurance agent and know everything about the possibility of denial of car insurance renewal. 

Improper Policy Switching

When people often try to switch their car insurance provider, they make one silly mistake that results in coverage gaps. They cancel their previous policy before the new policy is active. 

Whenever you buy a new car insurance policy (and you already have one), make sure that the new policy is active before you cancel the current one. Policy activation can take some time after purchase. Avoid this silly mistake. 

False Documents or Information 

There are many cases when insurance companies drop their policyholders due to false information provided by them. A common example is area code. Some area codes are more dangerous than others, which means car insurance is costly in these areas. 

So some people provide a false address to the insurance company to get lower prices. This is insurance fraud and will always result in the insurance company dropping the policy. 

Other Violation of Terms

Insurance companies have a long list of terms and conditions. For example, policyholders must add all the eligible members of their families as registered drivers. If they don’t, and someone from their family crashes the car, the insurance company will deny their claim. 

Not just that, but the auto insurer can also drop the policyholder, which results in a coverage lapse. Other possible reasons might include insurance fraud, failing to renew an insurance policy, etc. 

Out of all the possible reasons for insurance coverage lapse, insurance companies consider the worst-case scenario. So even if the reason for the coverage lapse was just forgetting to renew the policy or paying the premium, you’d still get a big price hike. 

Avoiding Coverage Lapse

The ways of avoiding a car insurance coverage lapse are very simple. A few precautionary steps would help prevent increased insurance costs or even getting dropped from insurance companies. 

  • Make sure you have reminders to let you know when the policy is about to end. Do not wait for the final days to renew your policy. It is best to get it done 30 days before your policy expires. 
  • Set up an automatic payment method so that even if you forget the renewal date, the premium amount will be deducted automatically on time.
  • If you are planning to not use your car for a few months, suspend your current policy and buy a non-owners car insurance policy to avoid coverage lapse. 
  • Make sure that your new policy is activated when switching car insurance.


About Author

Lapse in Car Insurance Coverage,c
Marshal NosaCEO
I'm a professional digital marketer with over 7 years of experience in the field. I create well researched content related to finance, cryptocurrency, stocks, forex and metaverse related articles.

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