An auto insurance lapse is something you want to avoid at all costs. A simple lapse in the term of your auto insurance can mean some pretty drastic consequences in terms of accident claims and much more. A definition of an auto insurance lapse can help drivers understand how important this is.
There are several different kinds of scenarios where drivers have a lapse in auto coverage. One is when the driver chooses to stop paying insurance, and leaves the car in a safe place without driving it. A more dangerous kind of auto insurance lapse is when a driver may not know that the insurance has lapsed because of missed premiums or other considerations. In these cases, the driver may be on the road illegally.
Having an auto insurance lapse is dangerous for a number of reasons. The most dangerous reason is that cancelled coverage means you might get into an accident with no car insurance and have a lawsuit brought against you to recover damages. Milder penalties like a point demerit may apply even if you don’t get into an accident.
Because an auto insurance company wants to keep its lapse ratio (percentage of policies issued that lapse over time) low, there are some heavy penalties for an auto insurance lapse. The company may or may not have a penalty phase; they may just drop your policy the day after a payment is not made. The company might charge extremely high “rejoining fees” to those who have missed a premium payment. They also may deny coverage entirely after a lapse. Other companies may have similar policies, and a driver with an auto insurance lapse may find it very hard to get any kind of coverage. In the meantime, it’s illegal to drive a car even one mile without the minimum liability insurance mandated by the driver’s state.
If you get into an accident where you are at fault and you aren’t currently carrying car insurance due to a lapse, you are then personally responsible for all of the damages and injuries incurred. This could cost you thousands of dollars for the other party or parties alone, not to mention yourself. If you are unable to pay, the affected individuals have the right to sue you in court.
Bodily injury and property damage liability insurance is, in most states, the absolute minimum required auto insurance. Driving without this insurance or some kind of waiver (which is only available in a few states) means that you are driving illegally and are subject to all the penalties which apply if you are caught. These penalties vary by state, but might include having your license suspended, receiving a fine, or having a point demerit applied to your driving record which will make insurance more expensive in the future.
If an auto insurance lapse is discovered, it is marked on your driving record as a demerit. Insurance companies check your driving record when deciding how much you will pay for premiums. Black marks on your record raise premiums and will cause you to pay more for insurance in the future.
An auto insurance lapse isn’t just illegal, but also dangerous for you and anyone you might be involved in an accident with. Drive responsibly and safely, and make sure you’re always carrying insurance.