What Happens if Your Car Insurance is Canceled for Nonpayment?

What Happens if Your Car Insurance is Canceled for Nonpayment?

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Just like with any recurring bill, you need to pay your car insurance premium regularly or your insurer will stop providing coverage. But unlike a missed phone bill, the consequences of missing an insurance payment can be far-reaching. After a cancellation for a missed payment, the insurer can increase your rates and your license may be revoked.

You'll usually have a grace period of between one and 30 days, but you shouldn't count on it to protect yourself. It's essential that you contact your insurer as soon as you realize you're behind on your insurance payments.

What to do if you can't afford or miss a car insurance payment

As soon as you realize you will likely miss or have already missed a car insurance payment, call your insurance company to let them know you're aware of the situation and ask what you can do next. The options available will depend on how long you've gone without paying your car insurance bill, your insurance company's policies and the laws of your state. But no matter the details of your situation, it's key that you communicate with your insurance company to figure out an arrangement. Ignoring or delaying the issue will only make your problems worse.

If the payment is not yet due

If your auto insurance payment is not yet due, or it hasn't been processed but you know you won't be able to afford it, you may be able to postpone payment or extend the due date temporarily while you come up with the money. Depending on your insurer, you may not even have to call an agent to do so. For example, Geico allows customers to delay auto-pay bills by up to nine days through the company's mobile app.

The agent you're working with may have some discretion about how much leeway to give you, especially if you have a credible reason why you won't be able to make the payment. They may also be able to arrange a partial payment to keep you insured if your insurance company allows it.

If you've missed payment by a few days

If you've only missed the payment by a few days to a week, you likely can reinstate your policy without a lapse in coverage or other serious consequences, as you're still in the grace period. You'll have to pay the amount you missed, usually with a late payment fee. Make sure to do so promptly, though, as the grace period may vary.

If your car insurance has been canceled

If your insurance premium went unpaid long enough for your coverage to be canceled, you'll have to apply for a new policy. Unfortunately, your rates will likely increase, as car insurance companies charge more for drivers who have had their insurance terminated due to missed payments. It's even possible that your previous insurer will not offer you insurance at all, in which case you'll need to go with another company, such as a nonstandard insurer.

It's illegal to drive without insurance in nearly every state, so once your insurance is terminated, you won't be able to drive. The longer you go without coverage, the bigger the price increase will be when you purchase a new policy.

After you have insurance again, you should contact your state's department of motor vehicles to update your insurance information and confirm that your registration and driver's license are still valid. You should also make sure you don't owe your old car insurance company money. It may eventually pass any overdue debts to a collection agency.

What happens when your car insurance is canceled for missing a payment?

If you miss a car insurance payment, you'll receive a legally required notice of cancellation from your insurer. This notice may come in the mail or by a phone call or email.

You'll usually have 10 to 20 days between the date of the cancellation notice and the date you are no longer covered. The exact amount of time differs by state. After that, your insurance will officially lapse and you'll no longer be able to drive your car legally. In some states, letting your insurance lapse also voids your registration — either right away or a few weeks after your insurance lapses. But no matter where you live, the longer you wait before rectifying the problem, the greater the consequences will be. So make sure you contact your insurance company immediately.

Long-term consequences of canceled insurance due to missed payments

If your car insurance lapses or is canceled, whether it's because of nonpayment or any other reason, you will likely face financial ramifications of some kind. The consequences can continue even after you have reinstated your insurance. Here are some possible outcomes of missing your car insurance payments.

  • Administrative fees at the DMV: Some states will charge you for even a brief lapse in insurance coverage. For example, in New York, drivers have to pay $8 per day for up to 30 days during which their insurance was lapsed, with increased penalties thereafter.
  • Car registration or driver's license suspension: Nearly every state requires drivers to insure their cars in order to register them, and many states require insurance companies to notify them if you let your insurance lapse. This could result in the automatic suspension of your car's registration or your driving privileges, leaving you unable to legally drive. You might even be required to carry an SR-22 if you are caught driving while uninsured, especially if you cause an accident.
  • Higher auto insurance rates: Insurance companies like to see that drivers can reliably pay their bills on time every month. People who let their coverage lapse, even for a short amount of time, will likely see an increase in car insurance prices the next time they renew.
  • Repossession of a loaned/leased car: Most car lenders require you to maintain full insurance coverage on the vehicle as long as the vehicle is financed. If your car lender finds out you are not carrying insurance on the vehicle, it may repossess the car.
  • Your credit score can drop: If you owe money on your car insurance and your insurer passes the debt to a collection agency, it will likely impact your credit score. This can affect your ability to get a credit card or loan, and the derogatory mark will remain on your credit report for up to seven years.

What happens if I pay my car insurance late?

If you pay your car insurance a couple of days late, you will most likely still be in the grace period. However, you will probably be charged a late payment fee. If your payment is later than the grace period allows, your insurance can lapse.

How long is the grace period before your insurance policy lapses?

The grace period for late payments before your policy lapses varies by insurer and by state. The grace period is typically anywhere between one and 30 days. It is very important to know the grace period for your policy and to contact your insurer if you expect to make a late payment.

How can you reinstate canceled auto insurance?

When your auto insurance is canceled, the first thing you should do is call your current insurer. If your policy has only lapsed for a couple days, it’s possible they can reinstate it. If your insurer requires you to get a new policy, you should shop around to search for the best rate. To learn more, check out our article on how a lapse in car insurance coverage affects rates.

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