Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 21, 2020

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Here's what you need to know...

  • Some companies will not give a warning before proceeding with consequences
  • Even if you pay your insurance company within the grace period, you will have to pay a late fee
  • If your insurance company cancels your policy due to nonpayment, you may not know right away

You check the days off on your calendar, getting closer to the due date for your car insurance payment. Knowing you don’t have the money to pay, so you start wondering what will happen to your policy.

If your insurance payment isn’t received on time, your insurance company reviews the terms of your policy, but in general, one late payment could have a devastating impact on your ability to drive legally.

Most states have laws that require drivers to maintain their coverage. If your vehicle is financed, the lender expects you to maintain full coverage at all times.

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Table of Contents

Possible Consequences of Late Payments

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Your insurance payment is considered overdue the day after your due date, but you may have a grace period that allows you to pay late without the threat of cancellation.

Most companies will issue a warning that your account is delinquent and you must pay in full before a specified date or risk serious consequences.

Some companies will not give a warning before proceeding with those consequences.

Listed below are a few of those consequences explained:

Late Fees

Even if you pay your insurance company within the grace period, you will have to pay a late fee.

Most companies are reasonable about this fee while others try to prevent recurring late payments by issuing stiffer penalties.

Increased Insurance Rates

Each time your insurance policy is up for renewal, the company has the opportunity to increase your rate if they assign higher risk to your account for any reason.

Most companies won’t charge you more for a single late payment, but they may do so if you have a habit of paying late.

Policy Cancellation

Some insurance companies will first suspend your policy, giving you the opportunity to bring the account up to date and reinstate coverage. Other companies may even cancel your policy for the lack of payment.

If you receive a notice that you must pay your account in full by a specified date, understand that cancellation is a possibility if the payment isn’t received.

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What happens if your policy is cancelled?

If your insurance company cancels your policy due to nonpayment, you may not know right away. They will send you a cancellation notice, but it can take a week or longer for it to receive it.

During that time, you may continue driving without realizing that you are uninsured.

Here is why this is a dangerous period:

  • The insurance company will notify your state’s Department of Motor Vehicles and ask you for proof of insurance.
  • The state may fine you for a short lapse in coverage or suspend your driver’s license.
  • The state may refuse to renew your vehicle’s registration if you cannot provide proof of insurance.
  • If you’re responsible for an accident, your insurance won’t cover the damages to your own vehicle or other vehicles involved.
  • If a lender has a lien on your vehicle, they may demand that you secure insurance or face default on your loan.

When you consider this list, you may look at one late payment a little differently. The potential consequences are far more serious than many drivers realize.

If you realize that your policy is canceled, it’s in your best interest not to drive until you secure a new policy.

What if you really can’t pay?

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Call your insurance company as soon as you know that you cannot make your payment. They will inform you of the grace period, if there is one, and may offer an extension based on special circumstances.

Some insurance companies will allow you to move your due date, but you have to do that before the due date.

If you don’t communicate with your insurance carrier, they don’t know whether you intend to make the payment or not.

In most cases, you will have to manually change the due date every month if you don’t call the company to request a permanent due date change.

They may still charge you a late payment fee for moving the date, but you won’t risk cancellation as long as you pay by the arranged date.

Planning Begins before You Buy a Policy

As you compare car insurance rates, take the time to research how different companies handle late payments.

If you know that you aren’t able to pay your bill on a specific day every month, try to find a company that allows you to adjust your due date.

You should also read your policy thoroughly to make sure you understand all terms before accepting.

Here is information to look out for:

  • Does the policy include a grace period?
  • What is the length of the grace period?
  • What late fees are charged and when do they apply?
  • How quickly can the company terminate your policy for nonpayment?

Knowing your terms will help you manage your policy responsibly even if you occasionally struggle to make the payments.

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