How Does a Lapse in Car Insurance Coverage Affect Rates?

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. To an insurer, this risky behavior increases your likelihood of getting into a car accident.

As a result of a lapse in coverage, your insurer will likely raise your rates. How much higher? Based on our analysis, individuals with a lapse of coverage under 30 days saw an average increase of 8%, while those with a coverage lapse greater than 30 days saw an average increase of 29%.

We always recommend drivers compare quotes from multiple insurers to find the best savings on car insurance.

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 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 and people 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 InsuranceCanceled Under 30 DaysCanceled 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%

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The results show the importance of getting back on an auto insurance plan as soon as your old plan is canceled. 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 drivers with a lapsed policy of fewer 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.

Again, we always recommend getting quotes from multiple insurers, as comparing rates can be one of the best ways to find savings on car insurance.

>> LEARN MORE: Auto Insurance Rate Increases

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 canceled 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.

>> LEARN MORE: Car Insurance Nonrenewal

If you are 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, sparing you 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. Unfortunately, that would be considered a lapse and leave you open to raised rates from your insurance company. You may be able to avoid any DMV and state penalties, however, by filling out an exemption form from the DMV.

>> LEARN MORE: The Best Car Insurance for Veterans and Service Members

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 easy if you are constrained financially, and have missed payments because you could not afford them. Car insurance is expensive, and it can 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 lower 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.

>> LEARN MORE: Auto Insurance Discounts You May Qualify For

Which states impose a penalty for a lapse in coverage?

If you have a registered vehicle, you need car insurance in almost every state in the U.S. Some states are better than others at regulating that, going as far as having companies report to state DMVs whenever the insurance for a registered car has lapsed. When the DMV knows about your lapse, you leave yourself open to a license and/or registration suspension, civil fines and SR-22 filings.

>> LEARN MORE: What is SR-22 Car Insurance?

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 penalty, $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.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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