Does A Lapse In Coverage Affect Your Insurance Rates?

Key Points:

• A lapse in coverage might increase your rates significantly depending on the length of the lapse.
• Avoid a lapse at all costs and consider canceling or suspending your registration if you’re storing your car.
• Insurance companies notify state DMVs of coverage changes, so the next company will discover the lapse.

If you’re wondering how a lapse in coverage might affect your car insurance policy, you’re not alone. Drivers often look for ways to make their payments more affordable and may consider canceling coverage, but going without auto insurance is never a good idea.

In this review, we’ll discuss the consequences of a lapse in coverage and what you can do to avoid it. If you had a lapse in coverage, we’ll recommend some of the best car insurance companies to find affordable rates.

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Will Car Insurance Rates Increase After A Lapse In Coverage?

Most car insurance companies will raise your rates if there is a lapse in coverage on your record. This is because a coverage lapse will make you look like a riskier party to insure. States require insurance coverage on registered vehicles so a lapse shows you could have driven uninsured–even if you didn’t.

The increase in your premium may be small for a lapse of less than 30 days, but every auto insurer is different. A lapse in coverage of more than 30 days could translate to hundreds of dollars more owed per year.

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What Does It Mean To Have A Lapse In Coverage?

A lapse in coverage simply means that you were not covered by an active insurance policy for a period of time. Whether the lack of coverage was intentional or an accident, insurance providers will commonly penalize you by increasing the price of your insurance once you reactivate or purchase a policy.

What If I Don’t Tell Anybody About The Lapse?

Car insurance companies report to state DMVs when registered vehicles are no longer covered. So, it doesn’t matter if you tell the next insurance company about the lapse in coverage or not. The insurance underwriter will find out when they look up your driving record with the state.

If you simply switch providers and avoid having a lack of insurance in the process, this would not be considered a lapse. The first company will notify the DMV that it stopped coverage while the new company will notify the DMV that it started coverage. Ideally, you should overlap insurance coverage by at least one business day to make sure this goes smoothly.

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What To Do If You Have A Lapse In Coverage

If you experience a car insurance lapse, the most important thing to remember is that you should never drive uninsured. Driving without auto insurance is against the law and can be a costly mistake. If you don’t have car insurance for a period of time, find another way to travel.

Drivers that find themselves without car insurance should get a cheap policy as soon as possible to avoid higher rates in the future. The longer you wait, the more expensive your rates will be once you do get insurance again.

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Why Is It Important To Avoid A Lapse In Coverage?

If you find yourself in a financial strain, our first piece of advice is to not cancel your car insurance policy. A lapse in coverage and the repercussions of driving without the minimum auto liability insurance required by your state is worse than you might think.

You can change insurance coverage as much as you want without penalty. Keep shopping around to find the best rate and consider minimum coverage or full coverage with high deductibles if your auto loan requires it.

Consequences can get more severe if you cause an accident while you’re experiencing a policy lapse and can include things like:

• Community service hours
• Fines (varies depending on your location)
• Loss of driver’s license, registration suspension, and revocation of license plates
• Reinstatement fee to get license, registration, and plates returned
• Jail time up to three months (varies depending on your location)

If you cause a car accident during a lapse in your car insurance coverage, you’ll be fully responsible to pay for the cost of medical bills and damages out of pocket.

What To Do If You Won’t Drive Your Car For A Period Of Time

The foolproof way to avoid a lapse in coverage, if you absolutely aren’t driving the car for a certain amount of time, is to cancel your registration. If you do this, the car won’t be legal to drive or be parked on public roads, so make sure you store it or park it on private property.

This strategy makes the most sense if you won’t be driving the car for a few months, because you’ll need to register it again and pay another fee to drive it. Some states may have a certificate of non-operation that basically suspends the registration.

Contact your DMV to get your options for canceling or suspending the registration if you’re planning on not driving the vehicle for a while. Keep in mind that no one else can drive your car while the registration isn’t active.

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Do’s And Don’ts Of Auto Insurance

Whether you’re having trouble making your car insurance payments or are worried about a future strain on your finances, below are some things to keep in mind about lapses in insurance coverage.

Do Choose A Higher Deductible To Save Money On Your Premiums

Consider choosing a higher deductible. This can be a good idea if you’re a relatively safe driver and don’t expect to be involved in an accident or need repairs. A higher deductible usually comes with a lower monthly payment, so this can be a good way to save and avoid a lapse in coverage.

Do Reach Out To Your Local Insurance Agent To Ask About Discounts

You might qualify for low annual mileage discounts that could lower your car insurance rates. This is also a good time to check on general discounts, like those for good students, safe drivers, bundling, and vehicle safety features.

Don’t Cancel Your Car Insurance Policy And Risk A Lapse In Coverage.

Even though canceling your auto insurance policy could save you money short-term, it’ll be harder for you to find affordable car insurance rates long-term.

Don’t Hide Your Financial Concern From Your Car Insurance Company.

Many providers are willing to work with customers who are worried about a lapse in coverage. Sharing your struggles with the right people at your insurance provider might be one of the surest ways to avoid an insurance lapse. Many representatives are eager to offer advice and help customers.

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How A Lapse In Coverage Affects Car Insurance: Our Take

A lapse in coverage can increase your rates because it makes you a riskier driver to insure. How much your future rates increase depends on how long the lapse is. Do whatever you can to avoid a car insurance lapse.

Our Recommendations For Cheap Car Insurance

While it’s important not to cancel your car insurance to avoid a lapse in coverage, it’s always a good idea to compare car insurance quotes from major providers available in your area to be sure you’re not missing out on better rates for the same coverage elsewhere.

USAA: Best For Military Members

Our car insurance review revealed USAA as the best auto insurance for veterans, active military personnel, and their immediate family members. USAA customers get affordable rates and access to a number of discounts tailored to the needs of military motorists. One of these discounts, the military installation discount, gives customers who garage their car on a military base up to 15 percent off on their car insurance rates.

USAA also has other types of car insurance like:

• Roadside assistance
• Rental car reimbursement
• Accident forgiveness insurance
• Glass coverage
• Gap insurance
• Car replacement assistance

Read more in our full USAA auto insurance review.

Geico: Best For Basic Coverage

Our Geico auto insurance review named Geico the Best for Basic Coverage. Geico is a well-known household name in car insurance that provides customers with customizable policies and affordable rates.

Geico has many discounts available for safe drivers, government employees, good students, and more. Plus, Geico customers can customize basic car insurance policies with extras like mechanical breakdown insurance and rental car reimbursement.

Learn more in our full Geico auto insurance review. You can also compare the two providers in our side-by-side Geico vs. USAA review.

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How A Lapse In Coverage Affects Car Insurance: FAQ

Below are a few frequently asked questions on how a lapse can affect insurance rates.

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How We Rate Auto Insurers

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.

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