What happens when your car insurance lapses?

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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...

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Chris Harrigan has an economy 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...

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UPDATED: Dec 23, 2017

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Here's what you need to know...
  • Certain limits of car insurance are mandatory in a majority of states
  • There are states with other financial responsibility laws which will give the driver options to comply with the law
  • Failing to carry the mandated car insurance can result in a misdemeanor conviction
  • If your insurance lapses in a state with electronic verification, the DMV will be notified of the lapse in real-time
  • If you are pulled over by law enforcement, you can be cited, arrested or subject to vehicle impoundment


Auto insurance is mandatory in virtually every state except for New Hampshire.

hile most types of insurance are optional, car insurance is state-mandated because of the damages that you could potentially cause to other parties.

Not only must a vehicle owner purchase auto insurance, it’s also their legal obligation to hold continuous coverage free of lapses.

When policy lapses, coverage is not afforded even when there’s a usually covered loss. If you’d like to learn more about what happens when car insurance lapses, read this guide to find out everything that you need to know.

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What is a car insurance lapse?

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When you purchase insurance, you’re given a term. The term is the period of time that your rates are valid and that coverage is provided.

Unfortunately, the term doesn’t guarantee that you’ll have automatic coverage through the expiration date. It just simply means that the carrier is limited as to why the company can cancel your coverage.

A lapse is technically defined as “the cessation of the policy due to time or inaction”.

You will either need to reinstate your coverage if you’re eligible or purchase coverage through another insurance company so that you’re complying with the law.

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What are the reasons for a lapse in coverage?

If you’ve received a notice that your coverage has been set for cancelation, it’s possible that you might be able to prevent it before it happens.

In some instances, however, an impending cancellation can’t be prevented.

Here are some of the most common reasons why car insurance policies lapse:

  • You did not pay your premiums and the grace period has run out
  • You didn’t disclose serious violations or accidents on your application for insurance
  • The car insurance company went out of business
  • Your driver license has been suspended or revoked
  • You did not reply to a request for information from your insurer
  • You no longer own your vehicle

What are the legal consequences of having a lapse in your auto insurance?

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Even if it’s unintentional, the consequences for driving without insurance are severe. When you have a lapse in coverage and you drive your vehicle, you fit into the class of uninsured drivers.

Being an uninsured driver is a crime and if you don’t comply with the law you could face some penalties you never even expected.

The consequences of an insurance lapse that lasts for more than a day or two could include:

  • Driving without insurance convictions that are often classified as misdemeanors
  • Mandatory court appearances and fines
  • Suspension of your driver license
  • Suspension of your license plates or impoundment of your vehicle
  • Reinstatement fees for license or plates
  • Sentence to serve up to 6 months in jail for multiple offenses
  • Requirement to file an SR-22 to prove financial responsibility

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What are the other consequences of auto insurance lapses?

There are both direct and indirect consequences when you have a gap in car insurance.

Not only could you face the legal repercussions in court or the fines through the Department of Motor Vehicles, you could also face issues that can last for years to come.

Here are some of the things that you should be aware of:

  • Having a loss where you’re held personally liable for all of the damages
  • Enforcement of forced-place insurance through your lender for failing to comply with rules
  • Loss of a job or a promotion because of being uninsured or having a misdemeanor on your record
  • Loss of a vehicle because you can’t afford the repairs on the vehicle by yourself
  • High-risk insurance rates through auto insurance companies
  • Loss of prior auto insurance discount

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How can you get caught with a lapse of insurance?

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It’s easy to assume that if you obey the traffic laws, you’ll never have to worry about having a lapse.

That’s not the case in today’s day and age where computer systems keep insurance companies, law enforcement officials and the Department of Motor Vehicles can all communication electronically.

Today, the most common way that drivers are caught without coverage is through electronic verification.

Since many state officials require insurance companies to verify coverage real time through an electronic verification system.

These requirements have helped to cut down on the rate of uninsured motorist in the state and the systems have paid for themselves in the form of fines.

Since you can be penalized for being uninsured even when you’re not driving or cited, it’s important that you avoid lapses.

Are there any exceptions to the rule?

Some states have special rules surrounding lapses of insurance.

There are special situations where going without insurance won’t lead to a fine or another type of penalties.

Here are some of the exceptions that are common:

  • Military employees who are deployed
  • Youthful operators who only have their permit and not their license
  • Continuous coverage with a motorcycle policy

How to Avoid a Lapse of Insurance Coverage

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One of your biggest responsibilities as a policyholder is to pay your premiums.

Since the biggest reason for a policy lapse is for non-payment, it’s important that you find ways to prevent that from happening.

If you aren’t good at keeping track of bills, you can set up automatic payments that are drafted from your account.

You may want to consider paying your premiums in full and set a reminder for your renewal date.

If you’re better at checking emails than mail, ask your insurer to send you email updates if there have been policy changes that need to be addressed.

These are the best ways to avoid gaps and the penalties for being uninsured.

If you’ve had a lapse in your car insurance, the shorter the lapse the better. You can either reinstate your coverage through your old provider or start to look for more affordable premiums through a new carrier.

Be sure that you price shop with more than one company before you opt for a high premium.

Use an online rate comparison tool to save time and you’ll see value-priced rates in just minutes without having to provide your information to multiple agents with multiple carriers.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

References:
  1. http://www.investopedia.com/terms/l/lapse.asp
  2. https://www.thebalance.com/avoid-a-car-insurance-lapse-527455
  3. http://traffic.findlaw.com/traffic-tickets/driving-without-valid-sufficient-insurance.html
  4. https://www.safeauto.com/info-center/SR22-insurance
  5. https://www.thebalance.com/penalties-for-driving-without-car-insurance-in-california-527033
  6. http://www.iii.org/issue-update/compulsory-auto-uninsured-motorists
  7. https://en.wikipedia.org/wiki/Uninsured_motorist_clause

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