When your auto insurance lapses it means you’re no longer carrying state required minimum insurance. This leaves you exposed to high risk and can lead to fines, fees, and more.
It’s important you rectify the situation as soon as possible to reduce the impact. Here’s what you should do now and how you can avoid an auto insurance lapse again.
The longer you wait, the more it will cost you. The auto insurance industry measures the lapse period from the time coverage stops until you either buy or reinstate a policy, turn in your vehicle plates, or your vehicle registration expires.
If you do not need auto insurance for a repossessed vehicle, you’ll need to provide proof. If you’ve moved to a new state, provide a copy of your new policy with at least minimum coverage limits.
How Do Lapses Occur?
Your insurance company may cancel your policy for non-payment or late payment of premiums, failure to renew, excessive traffic violations, or serious accidents.
However, lapses can also occur when you switch providers. If you do not ensure your existing policy and new policy mesh, you’re unprotected during the period in between the two.
How Much Does It Cost?
When you let your auto insurance lapse, the insurer notifies the DMV. In Rhode Island, you could face fines of up to $1,000, and a suspended license for up to a year. Additionally, suspended drivers are closely monitored for compliance for at least four years.
Vehicle registration and license plates can be suspended for up to a year too and drivers face administrative, license, and registration reinstatement fees. The DMV also randomly checks the insurance status of owners and charges an additional reinstatement fee when they do. In total, these fees can surpass $700.
Of course, your costs will be significantly higher if you’re in an accident and cause bodily harm or property damage without insurance. You’ll be responsible for everything, which can wipe out your assets and affect your future earnings.
Insurance lapses can also make it difficult to obtain a new policy. You may pay higher premiums as insurance companies consider you a high-risk driver.
If Your Policy Expires…
Contact your agent immediately. You may avoid a penalty if it’s within a few days and they can reinstate the policy. Otherwise, you’ll need a new policy.
Don’t drive until you have proof of new insurance. Many insurance companies provide an online system for payment and an insurance card.
If Your Insurer Cancels Your Policy…
You’ll need to shop for a new policy if your insurer cancels your policy for non-payment or traffic offenses. Your new insurer will probably charge you higher rates as they’ll deem you high-risk.
Work with an independent insurance agent to find the best coverage and rates. They do the legwork and know the insurance industry, but they work for you.
If they can’t find coverage for you, your state’s automobile insurance plan is your last resort. You’ll pay more for coverage for several years, but if you maintain coverage you’ll eventually qualify for insurance through the traditional insurance marketplace.
How To Avoid Lapses
Obviously, you want to avoid expensive insurance lapses. Always keep your license and registration current and surrender the plates of vehicles you no longer own as quickly as possible.
Open correspondence from your insurance company immediately and attend to matters promptly. Otherwise, you could end up with a costly coverage lapse.