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Every driver knows that car insurance, regardless of how cheap a policy you may find, is required in most states to operate a vehicle. However, many may still wonder what happens if a person lets their car insurance lapse. This can happen when drivers forget to make payments or if they are experiencing financial hardship, but it can have serious consequences.

Here’s what happens if your car insurance lapses.

When does your car insurance lapse?

Everyone knows that car insurance isn’t as cheap as it once was. The prices have increased quite a bit just over the last few years. Because of this, many people are finding it more challenging to pay for their car insurance. Despite this, keeping an active policy is paramount as it’s both required and it’ll pay off in the unfortunate event of a car accident.

Car insurance is important
A person inspecting a car | PrathanChorruangsak via iStock

So, when does your car insurance lapse after missing a payment? It really depends on the policy in question and the driver’s history with the insurance company. However, according to The Zebra, there is a grace period where a driver who has missed their payment is still insured. In fact, most companies will allow between seven and 30 days to make the payment before the policy lapses.

Drivers should check with their insurance company for the exact length of the grace period and how it works. It’s also important to know that car insurance companies then report lapses in coverage to the Office of Motor Vehicles. Additionally, any financing institution involved with your vehicle will typically receive a notification.

The consequences for not having vehicle insurance aren’t cheap

There are many consequences for letting your car insurance policy lapse. Of course, most of them are financial. First, if you go without car insurance, your rates will be higher once you try to get coverage again. On average, the rates increase about 8% for people who fail to retain coverage for 30 days or less. This, compounded with the already increasing prices, makes insurance lapses expensive.

Letting your vehicle insurance lapse also isn’t cheap because of fees. As mentioned, car insurance companies are required to report your lapse in coverage. Because of this, the Office of Motor Vehicles in most states charges a fee for how long you’re without insurance coverage. Failure to pay this fee results in it being referred to the state’s office of debt recovery, which means they can take the fee from your state income tax refund.

Drivers should also know that insurance companies can deny coverage due to insurance lapses. Denial of coverage may not always happen, but if so, it’s a stiff penalty. Of course, there’s also the obvious. If you get into a car accident without insurance, you’re on the hook for the damage. Additionally, getting pulled over with car insurance can result in having your driver’s license suspended.

Maintaining car insurance can be expensive. However, the consequences of not keeping an active policy can be dire. Luckily, there are also many ways to find cheap car insurance, and drivers can typically set up automatic payments.