Whether you forgot to update your auto-billing credit card or you’re struggling to make your monthly payments, getting your auto insurance canceled for lack of payment comes with some severe consequences. It’s therefore important to communicate with your insurance provider to prevent an insurance cancellation in the first place. But what happens when the worst-case scenario does occur?

Let’s take a look at what happens when you

don’t pay your car insurance

What happens if your car insurance is canceled for non-payment?

After you miss a payment on your car insurance, your insurer is legally required to send a notice of cancellation before they can cancel your coverage. If you still don’t pay what you owe by the cancellation date in your notice, your policy will be terminated.

Getting your insurance canceled doesn’t mean that you can’t get new insurance again. But if you don’t have a new policy already lined up, you’ll be dealing with an

insurance lapse

, which can complicate future coverage options and cost you a lot in fines and higher rates.

Here are a few major consequences of an insurance lapse:

DMV fines—depending on your state, you may have to pay a civil penalty when your insurance lapses.

New York

, for example, charges drivers $8 a day for the first 30 days of lapsed coverage, $10 a day for the next 30 days, and $12 a day until the 90th day (after which your plates and registration are suspended).

Registration or driver’s license suspension—most insurers are required to report lapsed coverage to your local DMV. This can result in an automatic suspension of your vehicle registration and driver’s license since most states require you to have car insurance to legally drive. Getting a new policy after a suspension may involve

filing for an SR-22

, as well, which adds extra steps and costs.

Higher premiums—not paying your premiums on time can indicate that you are not financially responsible, leading many insurers to label you as a

high-risk driver

. This essentially warns other insurers that you’re more likely to cost them money than a standard-risk driver. To compensate for the anticipated expenses, high-risk drivers receive more expensive rates.

Vehicle repossession—lenders typically agree to finance your vehicle as long as you maintain full coverage. Should your lender discover your insurance has lapsed, they may decide to repossess your vehicle.

Lower credit score—while lapsed car insurance alone won’t decrease your credit score, you’re very likely to see lower scores if your missed bill gets sent to a collection agency. This derogatory mark will stay on your credit report for up to 7 years, making it trickier to be approved for

car loans

or home loans during that time.

MORE:

How does your credit score affect car insurance?

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Why can your insurance company cancel your car insurance policy?

Your insurer is within its rights to cancel your insurance coverage in certain situations beyond non-payment, too. Here are a few other common reasons for policy cancellations.

Fraudulent claim

Insurance fraud is illegal in every state

(including Washington D.C.). Whether it’s as brazen as setting up a collision to scam someone for claim money or making an exaggerated claim to win out on extra cash—scamming your insurer is one surefire way to get your policy canceled.

It’s also a surefire way to get charged with a misdemeanor or felony, face possible jail time, and owe several thousands of dollars in fines and claims restitution. So if you’re on the fence about padding that minor claim for some money: just don’t.

Invalid driver’s license

Your insurer isn’t going to drop you the second you get into an accident—that’s what they’re there for, after all. But they may cancel your coverage if your

license gets suspended

or revoked from a more serious conviction, like a

DUI

Even if your insurance provider doesn’t end up canceling your coverage for a serious conviction, they may choose not to renew your policy once your policy term comes to an end.

Incorrect policy application information

Providing incorrect information about your driving record or location to pay lower premiums is another form of insurance fraud called misrepresentation. As such, you can expect an insurer to cancel your policy as soon as they find out.

A better way to save money on your car insurance premium (without committing fraud) is to compare insurance quotes from multiple companies and look for discounts you can benefit from. A

licensed car insurance savings app

can be a great resource to lower your premiums.

MORE:

What do I do if my car insurance with Progressive is canceled?

Do insurance companies have a grace period?

So what happens if you missed your car insurance payment: is it automatically game over for your auto policy? Not necessarily. Some insurers (but not all of them) offer policyholders a grace period during which a late payment can be paid without the threat of canceled coverage.

Typically, car insurance grace periods range between 10 and 20 days. A late payment fee may apply during that time. If you don’t make a payment by the end of the grace period, your insurer will send out a cancellation notice. Whether or not there is a grace period in your policy, it’s always best to contact your insurance agent as soon as you notice you’ve missed your due date to work out a solution.

What to do if you can’t afford (or miss) an insurance payment

If you’re struggling to make your car insurance payments, there are a few ways you can work on

lowering your car insurance premium

to something more manageable.

Increase your deductible—one way you can lower your monthly rate is by increasing your deductible. Though this will cost you more if you need to make a claim, your premium prices will usually go down.

Switch insurance companies—if you’ve been with the same insurer for years, there’s a good chance you’ll find lower rates elsewhere. Insurers tend to raise rates the longer you stick with them, which is why it’s a good practice to

shop for new car insurance every six months

Look for discounts—most insurers have discounts available for a wide range of factors. These can be for something as general as

bundling your home and auto insurance

, or as distinct as

a good student discount

. Different insurers have different deals, so you’ll want to compare at least three insurers when searching for an affordable plan.

Adjust your payment plan—if you can manage it,

paying car insurance in full instead of monthly payments

may save you money in the long term. Payment plans that are stretched out over time tend to pile more costs into your total premium sum.

Adjust your coverage—driving uninsured is worse than driving with less car insurance coverage than you’d like. As long as you have your

state’s minimum car insurance requirements

secured, you’re free to exclude some pricier add-ons like

comprehensive coverage

if it can help you avoid an insurance lapse.

Already missed your payment? Contact your insurer ASAP. They may be willing to work out a policy reinstatement if your coverage has recently lapsed and suggest solutions to ease your payment process moving forward. Communication is key here, so if you anticipate difficulty paying an upcoming bill, make sure you let your insurer know.

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Bottom line: don’t avoid your payments if you can’t afford to pay them. A phone call to your insurance agent has a much better shot of resolving your concerns without the risk of a canceled policy.

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FAQs

Is non-renewal the same as non-payment cancellation?

No. A “non-renewal” means that an insurer has chosen not to renew your policy for the following coverage term. Therefore, until your policy term is up, you will still maintain insurance coverage.

Non-payment cancellation, on the other hand, can occur in the middle of a policy term. Your insurer will give you a cancellation notice to alert you before doing so, however.

Can an insurance company cancel a policy after one missed payment?

Yes. An insurer is within its rights to cancel your coverage if you break your agreement with them by not making your monthly payment. That said, some insurers have grace periods between 10 and 20 days for missed payments, and many may be willing to work out a late payment if you contact them in a timely fashion.

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