Seven reasons not to let your car insurance policy lapse

Allowing your car insurance to lapse for even one day can be painfully expensive. Car insurance companies charge much higher rates for customers who have experienced any lapse in coverage, no matter how long the lapse was.

1. Rates Increase Dramatically

Statistics show that purchasing a new insurance policy after you have had a lapse in coverage can cost you almost 6% more in higher premiums.[1] Some insurance companies might raise your rates by as much as 8% on a single car if you have experienced any lapse in coverage over the previous year.

2. Driving Without Insurance is Illegal

In every state except New Hampshire, you are legally required to carry a minimum amount of liability and personal injury car insurance coverage before you can register your car or renew your tags. You could face hefty fines, you could lose your license for a time, or your car could be impounded because it is not insured.

3. Those with Lapsed Coverage More Likely to Have an Accident

Research shows that drivers who allow their insurance coverage to lapse are involved in more accidents than those who carry insurance continuously. The same financial trouble that causes someone to cancel his or her insurance policy could also cause someone drive poorly. The emotional strain of unpaid bills can also be distracting to drivers, making them less attentive to the roadway.

4. Insurers Legally Required to Cancel Coverage for Non-Payment

Most states have insurance regulations that require insurance companies to cancel a car insurance policy after a certain period if no payments are received. Your insurance could lapse if your payment is late by a single day in some cases. Usually there is a short window of time before the policy will be canceled, but the longest your payment can be delayed is 30 days in the most lenient situations. Once the policy lapses, you will have to deal with all of the financial and administrative trouble that comes with opening a new policy as someone who has a gap in their insurance coverage.

5. More Expensive to Insure Multiple Cars after a Lapse

The rates for insuring a single car after a lapse in coverage can increase quite a bit, but the rates for insuring multiple cars after a lapse increases even more. Drivers who insure more than one vehicle could pay as much as 12% more for their car insurance than they would pay without any breaks in coverage, even if the coverage lapse were relatively short.

6. Lapse Eventually Costs More than Ongoing Coverage

The recent economic downturn has caused many people to look for new ways to save money while they work to improve their financial outlook. Cutting out car insurance might save you money right away, but it will cost you more in the end. The increase in car insurance rates when you purchase a new policy will be more expensive than the amount of money that you saved on monthly premiums.

7. Paying for an Accident Out of Pocket

If you allow your car insurance to lapse for any reason, you are putting yourself at a high risk. The costs of repairing or replacing your car or another driver’s car can be exorbitant if you are paying out of pocket. You could face legal penalties for being in an accident without car insurance, and you could face a civil lawsuit that might cost you thousands of dollars in a settlement.


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