What happens with a late car insurance payment?
After your grace period ends, your insurance company may cancel your policy. And policy cancellations can cause your coverage to lapse.
After your grace period, your auto insurance company may terminate your policy. Before then, your insurer may send you a payment reminder via mail or email. If your policy ends and you don't have another policy lined up, your insurance coverage could lapse.
A lapse in car insurance is the length of time you remain uninsured after your coverage ends. Policy lapses can have financial and legal effects.
Firstly, if you don't have an active car insurance policy, you won't receive coverage after an at-fault car accident. Then, you're responsible for your and the other party's medical and vehicle repair expenses, which can result in thousands of dollars in out-of-pocket expenses.
If you reinsure yourself after a coverage lapse, you may have to pay higher car insurance rates on your new policy. Statistically, drivers with less insurance are more likely to file claims than those with higher liability limits. So, insurers tend to see drivers with a coverage lapse as higher risk.
Secondly, driving without insurance has legal consequences. Unless you live in New Hampshire, each state requires drivers to carry the minimum insurance coverage. If you drive uninsured, you may face fines between $25 and $5,000 and you could face license suspension.
Thirdly, if you're caught driving uninsured, you may need an SR-22 certificate from your insurance company. An SR-22 certificate helps states identify which high-risk driver has the minimum liability limits. And many insurers won't file and offer coverage to high-risk drivers needing an SR-22.
Finally, if you have an outstanding car loan, your lender will likely require comprehensive and collision insurance. Insufficient coverage may result in your lender repossessing your vehicle.