Dealing with a Lapse in Car Insurance

A lapse in car insurance usually occurs when a motorist fails to renew a policy around the time of expiration or if monthly installments on an agreed payment plan are missed. There are a series of implications that can arise if an insurance policy is discontinued because without it, a motorist will not be legally covered to use their vehicle.

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Shortly before a policy expires, the insurance company will send out a notice of renewal. The notice will include the expiry date and a proposal for the follow years’ premium. There is no period of grace applicable to a notice of renewal and if insurance is allowed to expire, any accumulated bonuses, discounts or savings may be lost.

In most US states, there are significant financial penalties in place if an insurance policy lapses and a motorists continues to use their vehicle, especially if the motorists concerned has DUI or DWI convictions filed against them. Drivers also run the risk of having their licenses revoked and court fees can quickly accumulate. In a worst-case scenario, the motorists could also face a jail term.

To avoid the risk of legal action, motorists who are not intending to renew a policy are advised to respond to their insurer stating that they will not be taking the option of a further year. In some states, this may mean license plates and vehicle registration being surrendered to the local Department of Motor Vehicles until such a time as a new policy is taken out.

Motorists should be aware that premiums may increase if a policy lapsed because of non-payment.  Under these circumstances, the policyholder will be considered a high-risk driver and prices will rise accordingly.

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