What Happens If There’s a Lapse in Your Car Insurance?

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Driving in Monument Valley (Photo: @thornton.geoffrey via Twenty20)
A lapse in car insurance can spell serious trouble if you’re still driving. It’s not just inadvisable, it’s illegal in the vast majority of cases. Only in New Hampshire is it possible to drive uninsured legally.
So, when you know you’ve done bad and want to do good, you naturally want to know: what happens if there’s a lapse in car insurance? Here’s the lowdown on the possibilities.

1. Absolutely nothing

If you’re really lucky and the lapse in car insurance was short and accidental, you might not suffer any adverse effects. Be aware this is the exception and not the rule. This situation usually comes up when you miss a renewal date or a payment. Provided you have a good history aside from this, your insurance company may simply reinstate your policy when you get your payments back on track.

2. You pay a reinstatement fee

Your car insurance provider may require you to pay a reinstatement fee to reactivate your coverage after a lapse for nonpayment. Reinstatements after there’s a lapse in car insurance can be of two varieties. The first is a reinstatement that doesn’t reflect the lapse, and it is as if you were never without coverage. The second type of reinstatement is essentially a reboot of coverage, and you get new effective dates. The first variety is preferable because your rates are sometime affected when a lapse in coverage is indicated in prior years.

3. It’s time to find a new insurance provider

Sometimes, what happens if there’s a lapse in car insurance is that your previous insurance provider doesn’t want you back. It’s not the end of the world, but it does mean you’re in the market for a new car insurance policy. Shop around, and you may even find a better value on coverage than you previously had. Also, be aware that your lapse may affect your rates adversely.

4. You get caught

One of the dangers of driving without insurance is getting caught red-handed. Whether you’re pulled over for a broken tail light or speeding, the officer is unlikely to be sympathetic to your lapse in car insurance and write you a ticket. This usually means you have to go to court and show proof of new insurance. You remain responsible for court costs, and you might even miss out on hours at work to take care of your legal issues.

5. You have an accident

The previous four scenarios operate under the assumption that the worst doesn’t occur. You could have an accident while uninsured. Aside from the potential for bodily injury, litigation, and court fees, you are responsible for repairing all damage if you are at fault.
In an at-fault situation, even your assets are at risk and bankruptcy on the table when damages are high. Even if you’re blameless in the incident, you still are caught driving with a lapse in car insurance. It is a lose-lose situation no matter how you view it.
While what happens if there’s a lapse in car insurance is part luck, remember this proverbial toss of the dice isn’t really up to fate. You can avoid lapses by being more mindful of when car insurance payments are due. If you’re the forgetful type, EFT autopayments may be your best route. If you’re having financial difficulties, reach out to your provider to discuss your options.