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: Aug 10, 2020

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Here's what you need to know...

  • Do not make late car insurance payments if you can help it
  • Your insurance company may cancel your policy without you realizing it
  • Once the DMV is aware of non-payment, they can suspend or revoke your license
  • Late payments can also affect your credit score
  • It is illegal to drive without insurance, so getting reinstated is essential

You do not want to play around with a late car insurance payment. Consequences of a late car insurance payment include late fees, cancellation of your policy, or possibly higher rates without you realizing it until it is too late!

You may pay your car insurance late thinking everything is okay, but the truth is that your insurance company may cancel your policy without you realizing it.

Then you might get in an accident or get pulled over by the police, think you have car insurance, and find out instead that the cancellation letter crossed with your payment in the mail, and you are no longer covered.

Paying your car insurance late can have life-changing consequences. Read the article below to learn why it is so important to pay your car insurance on time, what can happen if you do not, and helpful hints on how to stay current with your policy.

You can compare car insurance rates online by entering your ZIP code now!

Table of Contents

What kind of late fees can my insurance company charge me?

What happens if I miss a payment on my car insurance? An insurance company usually charges you after a set grace period of either five or ten days. However, some insurance companies do not allow for a grace period, so it is always best to contact your insurance company if you think you might be late with a payment.

Insurance companies are governed by the state, so if the state does not enforce a grace period, the insurance carrier does not have to offer one.

If your insurance company charges a late fee, it is probably around $10.

But it is not the late fee that should concern you. The fees that should concern you are the ones that the state issues when your driver’s license is revoked or suspended. Once you fail to pay your insurance, the insurance company is required by law to notify the Department of Motor Vehicles.

Once the DMV is aware of non-payment, they can suspend or revoke your license.

The expense of reinstating your license is costly. Some states charge a per diem rate of anywhere between eight and twelve dollars. Other states charge $200 and up for reinstatement.

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Why is it so bad to have my policy canceled?

When you try to obtain new insurance after a cancellation, you will run into difficulties. One of the questions the new agency will ask is if you have had any cancellations on your automobile insurance.

Whether you answer honestly or not, the agency will be able to see your cancellations when they pull your records. Having experienced a cancellation due to non-payment, your insurance rates will be higher.

You can expect to pay anywhere between 20 and 50 percent higher premiums than before your insurance was canceled.

You may also have difficulty finding an agency willing to cover you because you are now considered a risk.

Of course, if you get pulled over or are involved in an accident and your insurance policy is no longer active, you can be in severe trouble. Not only will you receive a ticket for driving without coverage, but you may also have to appear in court or go to jail.

In addition to these consequences, if you get in an accident and your policy has lapsed, the insurance company will not cover any of the damages. You will now have to pay for all of the damages out of pocket, which can be extremely expensive.

Do late car insurance payments affect credit?

A cancellation will affect your credit score. An insurance company can notify the credit agency of non-payment immediately. Then your credit rating will be affected. Insurance carriers pull your credit score to determine the cost of insurance premiums.

A poor credit score will result in higher insurance premiums or denial of coverage.

What are the best ways to avoid a late payment?

The best way to avoid a late payment or cancellation is to make paying your automobile insurance a priority. Establish online payments or automatic withdrawals from your checking account. If you must send your payment through the mail, be sure to allow extra time.

Figure out the best way to pay your premiums so that you cannot forget: whether it is monthly, semi-annually, or annually.

Remember that when the policy says it is due on the 15th, it is due by 12:01 AM on the 15th.

Play it safe and make sure the payment is made on the 14th.

Communication is essential in maintaining a good relationship with your insurance company. Discuss payment options with them to ensure your coverage remains active.

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When Missing a Payment on Car Insurance (6 Tips to Avoid Trouble)

  • If you realize you missed a payment, contact your insurer immediately. Most offer a five-day grace period
  • If your payment is missed by more than five days, you may have your coverage canceled
  • Automatic payments are an option to make sure you don’t forget a payment
  • Cancellation of coverage could lead to an insurance lapse, making driving illegal

Missing a car insurance payment is not a good thing, but there is a possibility it can be corrected. Like most people, you may have to deal with unexpected situations at some point in your adult life.

When they occur, you may be faced with difficult decisions regarding your car insurance payment.

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If you have to sacrifice a car insurance payment, it had better be for a good reason. Most states require insurance for all vehicles on the road.

In a case where you are just going to be late with your payment, your insurance company may be able to help you. Some offer a grace period of five days as a practice. If you need more time, you may have to look at other alternatives.

#1 – Call Your Insurer

Is there a grace period on car insurance payments?

Yes, five days is the average grace period on most insurance policies. If you are a seasoned policyholder with good payment history, you may be able to make a phone call.

Your agent wants to continue your policy if you are a good customer. A good motor vehicle record (MVR) is also a compensating factor.

The agent may be able to charge you a late fee and continue the policy.

In many cases, after the grace period, the policy is canceled. Any payments submitted after cancellation are returned to the policyholder.

#2 – Purchase Short-Term Coverage

If you have to skip a car insurance payment you may have to cancel your policy. During this time you may be able to purchase short-term insurance that will allow you to purchase coverage by the day, up to 28 days.

This may be your only option unless you park your car or truck and carpool or take public transportation temporarily.

Once you are able to reinstate your policy with your previous car insurance company, most will require another down payment to resume coverage.

If you have a good rapport with your car insurance carrier, they may make your policy retroactive. This means your policy period will not show the interruption of coverage.

Another condition, and perhaps most important, is the absence of any accidents since your last day of coverage. Your insurer may not be able to make your policy retroactive if an accident occurred since your last date of coverage with them.

If you were driving without proper coverage or while with another carrier, everything changes with your previous carrier.

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#3 – Avoid Missing a Payment

Most insurance companies, especially the larger ones, offer automatic payments.

To sign up for this service, you must give the insurance company either a credit card number or your checking account information. Then, when your payment is due, the amount is automatically charged to your credit card or debited from your bank account.

Car insurance companies usually start the automatic payments several days before your payment is actually due to allow you to make other payment arrangements in case your automatic payment is denied or returned.

Most insurance companies also permit you to cancel your payment arrangements at any time, so if you find having the premium payment automatically deducted or charged is not as effective as paying the bill on your own, you cancel the service.

#4 – Change Your Payment Amount

It is possible to change your monthly payments, as long as the total amount you pay covers your entire premium. It is best to speak with your insurance agent or company, but many carriers can set up monthly payment plans.

These plans usually include up to six payments, allowing you to spread your premium out over that period of time. However, keep in mind that each payment installment is likely to carry a fee of up to five dollars.

Although having fewer payments will equate to a higher payment amount each time, you can save money on installment fees.

However, if you set up automatic payments, some insurance companies will waive the installment fee, even if the payments are set up over six months.

#5 – If You’re Cutting It Close, Consider Making an Online Payment

If you sent your insurance premium to your carrier, and it was received a day after cancellation, you may have a dilemma to deal with. You may be held responsible for damages if you were at fault in an accident.

This is a possible scenario if you opt to send your insurance premiums by mail. Consider making an online payment instead.

As mentioned previously, setting up automatic payments are a great way to make sure you don’t make a late payment. Some companies prefer that you set up an automatic draft. That way your payment is drafted monthly on a designated date automatically.

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#6 – Find Ways to Lower Your Premium So You Don’t Miss a Payment

Missing premiums to a company with no grace period will mean having to start with a new down payment. There are many companies that have this policy.

They are also usually efficient about reporting a lapse in coverage to your state DMV. If you have a lapse in coverage a few times too many, you run the risk of having your license suspended in some states.

Sometimes it may seem easy to sacrifice the car insurance payment when times are tough and more immediate needs take priority. There are ways to make your premiums more affordable so that you do not have to take a risk that could cost you your license.

Some suggestions are to do the following:

  • Customize your policy to eliminate unnecessary cost
  • Increase your deductible
  • Take a defensive driving course
  • Combine your car insurance with your homeowner’s policy
  • Pay more on your initial down payment
  • Shop around for a cheaper policy

If your insurance company does not reward you with a shrinking deductible or some kind of incentive for a good driving record, maybe it is time to start a new search.

To start your comparison search for cheaper car insurance rates, simply enter your ZIP code here to get started!

References:

  1. https://claims.geico.com/ReportClaim.aspx
  2. https://www.statefarm.com/claims/why-choose-state-farm
  3. http://dmv.dc.gov/
  4. https://www.allstate.com/tools-and-resources/car-insurance/know-when-to-cancel-insurance.aspx
  5. http://banking.about.com/od/bankonline/f/setupbillpay.htm