What to Do if Car Insurance is Canceled for Nonpayment
You must pay your car insurance premium on a regular basis, just like any other recurring bill, or your insurer will stop providing coverage. However, unlike a missed phone bill, the consequences of missing an insurance payment can be severe. Following a cancellation due to nonpayment, the insurer may raise your rates and your license may be revoked.
You'll usually have a grace period of one to 30 days, but don't rely on it to protect yourself. You must notify your insurer as soon as you realize you are behind on your insurance payments.
What to do if you can't afford or miss a car insurance payment
Call your insurance company as soon as you realize you will likely miss or have already missed a car insurance payment to let them know you're aware of the situation and to find out what you can do next. The options available to you will be determined by how long you have gone without paying your car insurance bill, the policies of your insurance company, and the laws of your state. However, regardless of the specifics of your situation, it is critical that you communicate with your insurance company in order to reach an agreement. Ignoring or postponing the problem will only make it worse.
If the payment is not yet due
If your auto insurance payment isn't due yet or hasn't been processed but you know you won't be able to afford it, you may be able to postpone or extend the due date temporarily while you save up. Depending on your insurer, you may not even need to contact an agent. Geico, for example, allows customers to postpone autopay bills for up to nine days using the company's mobile app.
The agent you're working with may have some leeway to give you, especially if you have a credible reason for not being able to make the payment. If your insurance company allows it, they may also be able to arrange for a partial payment to keep you insured.
If you've missed a payment by a few days
Because you are still in the grace period, if you have only missed the payment by a few days to a week, you should be able to reinstate your policy without a lapse in coverage or other serious consequences. You'll have to make up the difference, usually with a late payment fee. However, keep in mind that the grace period may vary.
If your car insurance has been canceled
If you haven't paid your insurance premium for a long enough period of time, your coverage will be canceled, and you'll have to apply for a new policy. Unfortunately, your rates will almost certainly rise, as car insurance companies charge more for drivers whose insurance has been terminated due to missed payments. It's even possible that your previous insurer will refuse to provide you with insurance at all, in which case you'll have to seek coverage from another company, such as a nonstandard insurer.
- If you let your policy lapse, you may face higher rates and have a more difficult time finding insurance. Allowing your policy to lapse indicates to insurers that you are a high-risk driver.
- If you're having trouble finding coverage after a lapse, try a company that specializes in high-risk drivers, such as The General or SafeAuto. However, if you can, we recommend putting in the extra effort to find coverage with a mainstream insurer, as you'll likely find better rates and service there.
Driving without insurance is illegal in nearly every state, so if your insurance is canceled, you will be unable to drive. The longer you go without coverage, the higher your premium will be when you buy a new policy. A 15-day lapse may result in an 8% drop, while a 45-day lapse may result in a 24% increase.
You should contact your state's department of motor vehicles (DMV) once you have insurance again to update your insurance information and confirm that your registration and driver's license are still valid. You should also make certain that you do not owe money to your previous car insurance company. Any past-due debts may eventually be turned over to a collection agency.
What happens when your car insurance is canceled because you missed a payment?
If you fail to make a car insurance payment, your insurer will send you a legally required notice of cancellation. This notice may be delivered by mail, phone, or email.
You typically have 10 to 20 days between the date of the cancellation notice and the date you no longer have coverage. The precise amount of time varies by state. Your insurance will then officially lapse, and you will no longer be able to legally drive your car. Allowing your insurance to lapse also voids your registration in some states, either immediately or a few weeks later. However, regardless of where you live, the longer you wait to address the issue, the worse the consequences will be. So make sure you call your insurance company right away.
Long-term consequences of canceled insurance due to missed payments
If your car insurance lapses or is canceled, whether due to nonpayment or another reason, you will almost certainly face financial consequences. Even after you have reinstated your insurance, the consequences may continue. Here are some of the consequences of failing to make your car insurance payments.
- DMV administrative fees: Some states charge you for even a brief lapse in insurance coverage. In New York, for example, drivers must pay $8 per day for up to 30 days that their insurance was lapsed, with increased penalties thereafter.
- Car registration or license suspension: Almost every state requires drivers to insure their vehicles in order to register them, and many states require insurance companies to notify them if drivers allow their insurance to lapse. This could result in the automatic suspension of your vehicle's registration or driving privileges, rendering you unable to drive legally. If you are caught driving without insurance and cause an accident, you may be required to carry an SR-22.
- Higher auto insurance rates: Insurance companies prefer to see that drivers pay their bills on time every month. People who allow their coverage to lapse, even for a short period of time, will almost certainly see an increase in their car insurance rates the next time they renew.
- Repossession of a financed vehicle: Most car lenders require you to maintain full insurance coverage on the vehicle for the duration of the loan or lease. If your car lender discovers that you do not have insurance on the vehicle, it may repossess it.
- Your credit score can drop: If you owe money on your car insurance and your insurer sends the debt to a collection agency, your credit score will most likely suffer. This can make it difficult to obtain a credit card or a loan, and the negative mark will stay on your credit report for up to seven years.