Is It a Good Idea to Shop for Auto Insurance if My Policy Has Lapsed?

Feb 18, 2021 | Personal Insurance

Supposed that you are on a tight budget this month. After paying your bills, all you have left is money to buy groceries. After buying them, you flipped your wallet upside down and a coin dropped. Your phone rang and you found that your insurer is calling you. It turns out that you haven’t paid your bill for auto insurance. What will you do? Will you answer it?

Let’s accept the fact that earning money isn’t as easy as spending it. Every time that you step out of your house, it is unavoidable to buy something. Though the scenario above may be a little extreme, it is possible. Drivers on a tight budget tend to forget paying their auto insurance bills. It may be because they see it as a way to save money, or they don’t have any. This results in a lapse in their auto insurance policy. 

Many drivers wonder if it is a good idea to shop around for auto insurance after having a lapse in their policies. The thing is, they are uncertain of what the consequences are of doing so. Before talking about those, it is essential to understand what a lapse is first. Is it simply missing due payments? No, it is more than that. By being aware of what a lapse entails, we can talk about several topics that involve auto insurance policy lapses.

What is a lapse in an auto insurance policy?

You have a registered car but are no longer insured due to lapses. The period or the time that you don’t have insurance is what we call a lapse in your policy. Here’s a real-life example: You missed the payment in car insurance and it expired because of that. It has been three days since your insurance provider notified you that your policy has lapsed. It means that you have been driving uninsured for three days already.

Auto insurance is quite expensive in Denver, Colorado. If your insurance lapsed, what price comes next in your auto insurance premium? Driving around uninsured is illegal in almost every state. If you aren’t at-fault in the accident, then the other driver’s liability insurance will cover you. However, what if you can’t prove that you are innocent? You can be accountable for the damages and may face jail time.

What did I do to make my auto insurance lapse?

Many of you might say, “I wanted to save money and didn’t pay my bill for auto insurance.” Yes, you can delay the payment if your reason is valid, or you reached an agreement with your insurer. However, lapses in auto insurance don’t only happen because of that. Getting covered by an insurance company is a two-way relationship. You have to meet halfway.

There are several reasons for the lapse on your insurance policy. It’s all about talks and money. It may be because you forgot to pay or to renew your policy. It may be due to your payment being delayed for too long or past the grace period. The grace period is a certain period that your insurance provider grants you to make the payment if you didn’t pay on time. Below are some reasons why your policy lapsed.

You didn’t pay on time

As mentioned above, getting insured with an insurance provider is a two-way relationship. You have to give and take. Here’s a simple way to put it: you pay, they protect you. In the same way, you don’t pay, they won’t protect you. It is as simple as that. Make sure to pay on time so that the relationship continues.

Even if it’s a two-day lapse in your policy, it leaves a black mark or a blemish in your record. They can’t be sure that you aren’t driving around while your policy has lapsed. They can only assume that you are hitting the road uninsured. It can lead to serious consequences if you get in an accident.

Lack of money 

One of the most obvious reasons for having a lapse in an auto insurance policy is the lack of money. If you can’t pay on time, then it may be due to this reason or you are too busy at that time. Missing payments maybe because of this. There’s no shame if you have no surplus stash of money. As long as you can comply with your bills, you are a responsible person. 

Take note that there are ways to solve this problem. You can save money every day until the due date so that it wouldn’t affect your budget much. Start by saving small amounts. On the day of payment, you can settle your bill and be free of worry about lapses in your policy.

You wanted to cancel your policy or you didn’t renew

Some drivers may want to cancel their policy with that insurance provider and look for a new one. However, they are mistaken if they think that letting their policy cancel due to non-pay is okay. Yes, their insurers would cancel their policy, but they will have their credit scores affected. 

Credit scores are based on a person’s history of paying his debts, his bills, and settling his accounts. By having a high credit score, it will mean that you are a good debtor or client. Credit scores are applicable to many situations other than auto insurance. They are taken into account when you are borrowing money from banks, buying other kinds of insurance, and many others.

Cancellation due to nonpayment is a serious matter. By having a record of non-pay on your insurance, you may be subject to higher premiums in the future. Worse, they won’t accept you. Keeping a good record is a must if you want to save money.

If my auto insurance lapsed, what would happen?

Yes, your policy lapsed. You might say, “Oh, really?”. Remember that if you let your insurance lapse, it brings with it serious outcomes. It ranges from legal penalties to possible financial problems. It may affect your rates, which will bring you more headaches. Remember, it isn’t that simple.

The reason why you should avoid having a lapse in your insurance is that the damage can be permanent. It may be hard to recoup the losses. Not only will it bring you trouble, but it will also make you spend more money. If lady luck isn’t on your side, then it is unfortunate of you.

Will my premiums increase?

Yes, they will. Let’s say your policy lapsed because of nonpayment. After settling it, you asked your agent about your premiums. He said that you will have an increase of about $50 in your rates. If you are struggling to pay $200 in the past, then paying for $250 will be harder. An increase in your rates is one of the results of having a lapse in your policy.

Why will your rates increase? Having a lapse in insurance means that you are a risk. You will be considered a risk because you drive around uninsured due to the lapse. Speaking about insurance, the higher the risk, the higher the premiums. Your insurer will raise your rates if you are a high-risk driver. If something happened to you like getting into an accident, then the insurance company will have to reimburse more. Hence, the increase.

Am I subjected to legal penalties?

Yes, you are. It is illegal to drive uninsured. Some people may say, “If you won’t get caught, then you’re not guilty.” What if you get into an accident? Can you still say that? It will be fortunate for you if the other driver is clearly at fault. However, if the details are vague and you are deemed as the one at fault, then you will suffer from legal penalties.

Almost every state requires minimum auto liability insurance. If you have lapses in your policy, then you may be violating the law. The penalties you can receive don’t only involve your money. The result may cause you to lose your license and registration. Moreover, you may be subjected to jail time. It varies from state to state, but they will all hold you accountable.

What will happen to my pocket?

Your pocket might be emptied. When you are not covered, all the repairs will be funded by you. For example, you are involved in a collision. If you are not covered by collision insurance, then you will have to pay out of pocket for the repairs. In addition, you may be sued by the other party. You will have to pay for the damages, the injuries, the lawyer, and of course, the fine – all out of your pocket.

Will you let your policy lapse if you know that you might spend more? It will be a better move to pay your insurance properly to avoid lapses. You need to think about it to avoid future problems. Yes, you will have extra money by not paying your insurance. However, in the next moment, you have to pay more.

What should I do if my policy lapsed?

You might think that it is okay to leave it like that. However, since you didn’t pay, the longer it is before you end the lapse, the higher your premiums will be. That is because it affects your credit score. As mentioned above, they may offer you high premiums if you have a bad history. Worse, they will reject you.

Having your policy reinstated may be possible if you talk with your agent. If it has only been two to three days, then you may be able to negotiate with the rate. However, if your policy has lapsed for a week or a month, expect higher premiums. Keeping a good record for at least half a year or a year may reduce your rates.

The big question: Is it a good idea to shop for auto insurance if my policy has lapsed?

The answer is yes. Actually, this is one way to save money on auto insurance. If you can’t accept the higher premiums that you will have to pay, then shopping around is a good idea indeed. It will help you find the best quotes by comparing them. Of course, lower rates doesn’t mean it’s the cheapest one available.

To make the most out of shopping around, hunt for the companies that provide good services at low rates. However, expect that you will encounter higher premiums at first due to your credit score. Nonetheless, it is one way to expand your options. 

Just remember that before applying for a new one, it is better to end the old one first. As mentioned above, there are several ways to cancel your policy properly. By following those, you can settle your account and find a new provider.

What are other ways to make my premiums more affordable?

There are many existing ways to lower your rates. It ranges from getting discounts to using your smarts and being practical. Finding ways to lower your rates is actually effective for avoiding lapses in your policy. That’s because you can now afford it through discounts. Take a look at these tips to be able to do that.

Ask for the available discounts you can get

Discounts exist almost everywhere. You can see them in shopping malls, stores, and even when buying coffee. Most of the time, you can take advantage of discounts if you buy two items together, or by buying in bulk. Similarly, you can get discounts on auto insurance. By meeting certain conditions, you can say hi to discounts and welcome them in your arms.

You may be wondering if how you drive actually affects your premiums. The answer is yes. By having a good driving record such as having no tickets for speeding, you can get discounts. This is only one way to receive a discount. There are still more. Below are some ways to get discounts.

Bundling policies and loyalty award

Just as it is mentioned above, when you buy things together, you can get discounts. In buying insurance, you can get discounts by bundling policies in the same provider. For example, you are covered in homeowners insurance by a company. If you buy auto insurance from the same company, then you may be able to receive a discount.

Let’s say that you got insured by a company this year. Despite ten years passing by, you are still insured by the same company. You can receive discounts from them because of staying loyal to their services. Of course, you may want to switch companies after a year or two. Nonetheless, you can think of it twice because it is still a discount.

Usage-based insurance

If you don’t usually drive for long distances and long periods, you may want to consider getting covered by usage-based insurance. This kind of insurance is literally “pay as you drive”. Your insurer will install a device in your car to track your driving habits. You will be able to save money on this because you control the amount that you will have to pay.

There are actually two types of usage-based insurance. One is based on your driving habits while the other is based on your mileage. It means that you are the one in charge of how much you will pay. Below is a brief introduction to the two types of usage-based insurance.

  • Pay-how-you-drive.  This kind of insurance monitors your driving habits. It includes hard braking, your speed, and many others. This one suits those who drive conservatively the best. The less likely they are to get in an accident, the lower their premiums.
  • Pay-per-mile. Driving for long distances means a higher risk of accidents. The fewer miles you drive, the lower your premiums will be.

Defensive driving courses

If you have finished a defensive driving course, then you can receive a discount. Defensive driving courses teach you how to drive “defensively.” It is meant for safe driving. It will help you avoid getting into collisions or at least reduce the impact.

Finishing this course means that you have a lesser risk, so you can get a discount. Of course, it is understandable that not everyone has taken the course. Nonetheless, you can still get discounts by fulfilling other criteria.

Anti-theft devices and safety features

Do you have an anti-theft alarm installed in your car? Do you have an airbag installed? Having these two can get you discounts. If you are covered by comprehensive coverage, then your insurer will cover you in case your car gets stolen. However, if you have an anti-theft alarm, the risk significantly lowers. Thus, it earns a discount from your insurer.

By having an airbag installed to be ready for collisions, you are lowering your risk of getting heavily injured. The insurer will pay less, so they can give you discounts for installing one. Nevertheless, whether there are discounts or none, it is still better to install these two devices.

How can I avoid lapses in my policy?

There are ways to avoid these lapses. You can follow them so that you won’t have a bad record. It is your option. Keep in mind that some ways that will be mentioned below may not be applicable for you due to several reasons. Even so, it is still worth knowing these tips.

Cancel your insurance policy properly

There is a proper way to cancel your policy if you really want to. Letting it cancel by not paying is a wrong idea. It is better to make things clear when talking about money and insurance. By properly canceling your insurance, it would make things clear and won’t affect your credit score. Please remember that you may not be able to cancel your insurance due to auto loans, or if not offered by your insurer. Below are some ways of canceling your policy properly.

Call your insurer

Since we’re in a technologically advanced world, phones are one of the most accessible media of communication. Making a phone call is simple. With just a few taps, you can notify your agent that you are canceling your policy. If your insurer is easy to talk with, then you may get lucky and get your policy canceled after the phone call. However, to make things sure and clear, request for the documents and necessary papers to sign.

Fax

Sending a message through fax is a good way to cancel your insurance. Just make sure that you will send all the details needed and the cancellation date that you want.

Face to face

Meeting up with your agent is the most direct way of canceling the policy. At the meetup, you can sign the papers and then go back home. If there’s a chance of negotiation, such as your agent offering you lower rates, then maybe you can think about it.

Let your new insurer deal with it

Some insurance companies offer to process the cancellation of your policy. They only need the details such as name, policy number, date, cancellation letter with your signature. You can sit back and relax knowing that someone does it for you.

Choose the most appropriate method of payment for you

If you are forgetful of paying your bills, then there is a suitable payment method for you. Can’t pay monthly? Just pay annually. Paying your insurance can be quite a hassle. Not only do you have to calculate every month, but you can also even somehow forget them. Below are some payment methods that you can opt for.

  • Making annual payments. To prevent lapses due to non-payment, pay for the whole year at once. By making annual payments, you will not have to cut some money off your monthly budget every time. A worry-free way of paying for insurance!
  • Pay monthly.  Most drivers choose to pay monthly. That’s because they are budgeting their monthly salary. This is a suitable option for those who are responsible people who never forget to pay their bills.
  • Electronic funds transfer. You will never worry about making missed payments if it is automatically paid. The electronic funds’ transfer is exactly that.

Final Say

You shouldn’t let your policy lapse in the first place. That’s why you shouldn’t be surprised at higher premiums. Nevertheless, shopping for auto insurance after a lapse in your policy is an idea that you shouldn’t ignore. It is one of the best ways to save money on auto insurance. Just remember to settle all your records before looking for a new one.

Ask us about auto insurance now! We, at Advantage Insurance Solutions, can give you the best insurance quotes to suit your needs. Should there be any questions and concerns, we will gladly assist you. Call us today!