Auto Insurance Basics

How Does a Lapse in Car Insurance Coverage Affect Rates?

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Having a lapse in your car insurance automatically pegs you as a potential risk taker to insurance companies. This risky behavior extends to your likelihood to an insurer of getting into a car accident. As a result, your rates will be higher. How much higher? We explore further in this article. 

What is a Lapse In Car Insurance?

A lapse in car insurance is any period in which you have a registered car, but do not have car insurance. There may be several reasons: your policy ran out, your policy was cancelled because you missed a payment, you no longer drive, you were deployed, and many more.

If Your Policy Ends Due to Missed Payment or You Forget to Renew the Policy

The most likely scenario is missing a monthly payment or forgetting to renew, leading your company to cancel the policy. Once your policy is no longer in effect, your car insurance company will notify the DMV telling them you are uninsured. Depending on the state, being uninsured will leave you open to fines and numerous other penalties. The longer you wait to renew your policy, the more expensive your rates will be as well. 

If You are Being Deployed Overseas, or Studying/Moving Abroad

If you are being deployed overseas, you won't be using your car much. The same goes for those living or studying abroad for a period of time. Military members have a few companies like USAA, GEICO and Esurance that will allow them to suspend car insurance while they're away. Suspending insurance is not considered a lapse, thus sparing them from raised rates. If you are studying or moving abroad, you will have to get an affidavit from your state's DMV stating you will not be using the vehicle. 

Not every company will allow you to suspend your car insurance. If your car is leased, you may not have the option to suspend coverage. If suspension is not possible, you can remove yourself from the policy (if there are others on it) or cancel your insurance. That would be considered a lapse, and thus leave you open to raised rates from your insurance company unfortunately. You may be able to avoid any DMV and state penalties however by filling out an exemption form from the DMV. 

How Much Will Auto Insurance Rates Increase after a Lapse?

To get an idea of how rates would increase, we compared a series of quotes from New York and Pennsylvania from GEICO, State Farm and Progressive. We were curious to see if the states and companies differed in their penalties for a lapse in coverage. We got quotes for three scenarios: people who were currently insured and seeking renewals, people whose insurance recently expired within the past month, or who haven't had insurance for more than 30 days (but were insured in the past). The prices per month are listed below:

State CompanyW/ Car Insurance Canceled Under 30 Days Canceled More 30 Days
New York State Farm $163 $164 $227
New York Progressive $138 $144 $158
New York GEICO $61 $67 $112
Pennsylvania Progressive $92 $92 $92
Pennsylvania State Farm $73 $91 $98
Pennsylvania GEICO $67 $73 $67
Avg. Increase in Rates 8% 29%

The results show the importance of getting back on an auto insurance plan as soon as your old plan is cancelled. The two states and three companies had about the same average rate increase for a lapse in coverage. There appears to be a small penalty for those with a lapsed policy of less than 30 days, but that can dramatically increase if you let it go on for longer, an average of about 30% more per year. That can translate to hundreds of dollars that you'll be overpaying. So what are some ways to get back coverage? 

What Should You Do If You Have a Lapse in Coverage?

The one thing you should never do is drive uninsured. Driving without insurance, as we discuss here, is costly and illegal. Getting caught in an accident uninsured could even lead to jail time in some states. If you are uninsured, and need to drive, you need to get back onto an insurance policy.

Of course, that may not be so easy if you are constrained financially, and missed payments because you could not afford them. Car insurance is expensive, and it does take a chunk of your monthly salary. If your livelihood depends on using your car however, you are going to need to find a way to get affordable auto insurance. Our best advice would be to restructure your policy. Choosing lower limits, can ease your payments by a good amount. By going here, you can also find numerous other ways to get down your monthly rates, such as applying for discounts. The longer you wait, the more expensive your rates will become, thus costing you more money in the long run. 

Which States Impose a Penalty for a Lapse in Coverage 

If you have a registered vehicle, you need car insurance in mostly every state in the U.S. Some states are better than others at regulating that, going so far as to have companies reporting to state DMVs whenever the insurance for a registered car has lapsed. When the DMV knows about your lapse, you leave youself open to a license and/or registration suspension, civil fines, and SR-22 filings. Each state has varying forms of punishment, as you can see in the table below:

StatePenalties
Alabama $200 license reinstatement penalty then $400 second time
Alaska $100 license reinstatement penalty for first lapse
Arizona $50 license reinstatement penalty 
Arkansas $50 license reinstatement penalty 
California $14 license reinstatement penalty 
Colorado $40 license  reinstatement penalty
Connecticut $200 license reinstatement penalty
Delaware $100 lapse penalty per vehicle/ $5 per day after 30 days
District of Columbia $150 lapse penalty/$7 per day after 30 days
Florida $150 registration and license reinstatement penalty for first lapse, $250 for second, $500 for third
Georgia $25 penalty for lapse longer than 10 days, then $60 after 30 days
Hawaii $20 license reinstatement penalty
Idaho $85 license reinstatement penalty
Illinois $100 reinstatement penalty
Indiana $150 reinstatement penalty first offense, $225 second offense, $300 for third offense
Iowa NA
Kansas $100 reinstatement penalty first offense, $300 for second offense within 1 year
Kentucky $40 registration reinstatement penalty
Louisiana $125 lapse penalty for 30 days, $225 for 31 to 90 days, $525 over 90 days up to $850 max
Maine $50 license reinstatement penalty, $20 to $30 additional penalty, and $35 registration penalty
Maryland $150 penalty first 30 days, $7 for each day following 30 days, and registration penalty up to $25
Massachusetts $500 reinstatement penalty
Michigan $50 registration penalty
Minnesota $30 license and registration reinstatement penalty
Mississippi $30 license reinstatement penalty
Missouri Have to be stopped by police, 
Montana No charge for first lapse of insurance
Nebraska Reinstatement penalty of $500
Nevada $250 penalty for under 30 days, $250 if lapse b/w 31 to 90 days, $500 if lapse  b/w 91 to 180 days, and $1,000 lapse was more than 181 days
New Hampshire NA
New Jersey Restoration penalty of $100
New Mexico Registration reinstatement penalty of $30
New York $8 per day civil penalty for lapses under 30 days, $10 per day for next 30 days, and $12 per day for 30 days after
North Carolina $50 civil penalty first lapse,  $100 for the second lapse, $150 for third
North Dakota NA
Ohio $60 penaltys, $100 reinstatement penalty for first offense, $300 for second, $600 for third
Oklahoma $125 administrative penalty and $275 reinstatement penalty
Oregon $75 license and registration reinstatement penalty
Pennsylvania $88 restoration penalty
Rhode Island $50 reinstatement penalty
South Carolina $5 per day lapse penalty up to $200
South Dakota $50 to $200 license reinstatement penalty depending on time lapses
Tennessee $50 administrative penalty and $65 license and registration restoration penalty
Texas $100 reinstatement penalty
Utah $100 reinstatement penalty
Vermont $71 license reinstatement penalty
Virginia $145 registration reinstatement penalty
Washington $75 reinstatement penalty
West Virginia $100 registration reinstatement penalty
Wisconsin $60 license reinstatement penalty
Wyoming $50 reinstatement penalty

Some states are harsher than others, but essentially, you should try to never let your auto insurance lapse. 

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