Driving during a lapse in coverage

Driving during a lapse in coverage can lead to fees, especially if the lapse is long. Bouncing from insurance companies can increase policy rates.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 21, 2020

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Here's what you need to know...

  • A lapse in car insurance occurs when you cancel your policy or stop paying your premiums
  • The longer the lapse, the more likely it is that you will have to pay a fee for it
  • A person who bounces from insurance company to insurance company will pay more for their policy than someone who has a history with the same company
  • The kind of proof you need to avoid paying lapse fees depends on where you live

Whether or not there is a fee when you have a lapse in your car insurance will depend on a number of factors, such as where you live, why you have a lapse, how long the lapse is, etc.

What happens if you lapse on car insurance? The longer the lapse, the more likely it is that you will have to pay a fee for it.

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When does a lapse in car insurance occur?

How can I stop my insurance lapse? A lapse in car insurance occurs when you cancel your car insurance policy or stop paying your premiums while your vehicle is still registered.

Because it is against the law in every state but New Hampshire to drive without car insurance, all other states have some sort of system in place to ensure that they know when a driver allows their insurance to lapse.

In some states, there are situations where a lapse is allowed while your vehicle is still registered.

For example, if your vehicle will be in the shop for an extended period of time, you may be able to stop paying your insurance without having to turn in your tags or pay a fine.

Another example of when you may be allowed a lapse is if you are placing your car in storage. In this case, you should keep some sort of insurance on your vehicle to protect against damage that could happen while it is in storage.

There are some places — like Florida, for example — that offer no leeway for carrying insurance on a registered vehicle. If your vehicle is registered, you must have at least the minimum state-required car insurance, or you will face fines.

If you won’t be driving your vehicle for an extended period of time, you must turn in your tags to avoid paying for car insurance.

If you aren’t sure whether or not your state requires you to carry car insurance on a vehicle that is out of commission, you can easily find out by talking to your insurance agent.

You can also visit your state’s Department of Insurance website to determine the laws in your area.

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Is there an average fee for a lapse in car insurance?

How much does a lapse in insurance cost? Unfortunately, there is not a standard insurance lapse fine. In some states, you have to pay to have your vehicle registered again, which can cost several hundred dollars.

Other states have a plate reinstatement fee that could be as low as $50.

There is also the possibility that, in addition to the fees you have to pay to reinstate your vehicle or your tags, you will also have to pay some fines for allowing your insurance to lapse. Typically, these fines are based on the frequency of the lapse.

For example, if you let your insurance lapse once in three years, your fee might be $100. The second time you let your insurance lapse, the fee might be $200, and so on.

Some states have fees that exceed $1,000, but it is unusual for things to escalate to that level.

Typically, if you get to that point, you will find that you will lose your license and may even face some jail time. Again, this all depends on the state in which you live.

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How long do I have before the fees accrue for a lapse?

How long are you penalized for a lapse in car insurance? The good news is that, in most states, you have 10 days to provide proof of insurance after a lapse without paying any fees.

The bad news is that there are some individuals who take full advantage of this system, purchasing insurance, and then letting it lapse and waiting a couple of months to purchase insurance again.

This type of fraud is becoming more difficult with more states automating their systems. In the past, it could take a couple of months before you received a notice that your insurance had lapsed.

After that, you would have 10 days to provide proof of insurance or provide proof that you were no longer driving your vehicle.

Today, however, if a state has its system automated, then they can often have a notice in your mailbox within a week of the lapse, which means that you need to take care of the problem faster.

It also saves taxpayers money because fewer people are able to allow their policies to lapse without consequences.

In addition, many car insurance companies refuse to insure people who don’t maintain a steady policy on their vehicles.

Insurance companies all have access to a central database that lets them know how many claims a particular driver has had, how often they switch insurance companies, how many times their policy has lapsed, etc.

Even if an insurance company is willing to insure a policy hopper, that person will pay more for their policy than someone who has a history with the same insurance company.

Even if their driving record is exceptional, they can simply expect to pay more.

Since you don’t want to be paying hundreds of more dollars a year for your car insurance, you can receive a discount for staying with the same company for a year or longer.

What kind of proof do I need to avoid paying fees for a lapse?

Couple with papers stressed over bills.

If you live in a state where they allow you to suspend your car insurance while your vehicle is being worked on or in storage, then you will need to inform your insurance company of the condition of your vehicle.

In some states, you will be required to provide proof of your storage contract that specifically mentions the storage of your vehicle.

If your vehicle is in for long-term maintenance, then you will have to bring in a statement from your mechanic.

If you are doing the work yourself, then you may be able to sign an affidavit stating this fact.

There are some states that will require you to turn in your tags but won’t charge you a fee to get your tags back.

Others require you to turn in your tags and pay a small fee for getting your tags back. Again, everything is contingent upon where you live.

If you have sold your vehicle, then you need to provide your state registration office with proof of sale by just turning in your license plates.

You should never give your license plates to the buyer of your car; they are responsible for getting their own plates.

What’s more, by keeping the license plates, you can save on registration fees if you buy another vehicle — sometimes as much as $300.

If you aren’t planning on replacing your vehicle, you need to turn in those plates so that you don’t face insurance lapse fees.

The bottom line is that you don’t want to let your auto insurance lapse. If you are struggling to make your payments, it may be time for you to consider other insurance options by getting some free quotes.

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  1. https://www.esurance.com/info/car/myth-a-lapse-in-coverage-wont-affect-your-rate
  2. https://disb.dc.gov/
  3. https://www.nationwide.com/auto-insurance-coverage.jsp
  4. https://www.allstate.com/tools-and-resources/car-insurance/insuring-a-car-in-storage.aspx
  5. https://revenue.alabama.gov/motorvehicle/registration_faq.cfm

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