How Do Gaps in Coverage Affect Car Insurance Rates?

Last Updated on August 13, 2020

Some people think gaps in car insurance coverage are not a big deal. These people are wrong: gaps in auto insurance have a significant effect on premiums. If you fail to renew your car insurance policy on-time, then you may have a gap in coverage, and that gap can lead to serious consequences.

How much does a gap in coverage affect car insurance rates? How much money will you lose from your lapse in coverage? Below, we’re answering all of the questions you might have about gaps in insurance coverage.

What Causes a Gap in Car Insurance Coverage?

A gap or lapse in car insurance coverage can have a significant effect on car insurance prices. Policyholders with gaps in coverage on their insurance history report an average of 9% increase in their insurance rates.

Some of the Reasons for a Lapse or Gap in Coverage Include:

• You failed to pay your car insurance premium on time
• Your car insurance company canceled your policy
• Your car insurance company closed down, went out of business, or stopped selling car insurance
• You were convicted of a DUI or another serious at-fault incident and the car insurance company now sees you as a high-risk driver
• The insurance company messed up the paperwork, or there was some communication breakdown
• You lost your license and failed to renew your car insurance policy

You deliberately decided to let your car insurance policy lapse – say, if you were traveling for an extended period of time or living in a city where you didn’t need a vehicle

Sometimes, lapses in coverage occur for an obvious reason: you forgot to pay the bill from your car insurance company. In many cases, however, even a good driver can suffer a lapse in insurance coverage because of a paperwork error.

You might suffer a lapse in insurance coverage for all of these reasons. Now, let’s look at the impact of a lapse or gap in car insurance coverage.

What Happens When You Let Car Insurance Lapse?

If your car insurance lapses, then you’ll save money in the short-term. After all, you’re no longer paying your insurance premiums.

However, any savings will be exclusively short-term: in most cases, a lapse in car insurance coverage will cost you money in the long-term.

Insurance companies use your driving history to calculate insurance premiums. If you have a clean driving history, then you’re seen as a low-risk driver and you’ll pay lower premiums. If you have no car insurance history over the last few months or years, however, and you have a lapse in coverage, then the insurance company has limited evidence that you’re a good or bad driver.

If an insurance company can’t find a continuous history of your car insurance coverage, then the insurance company might assume you’re a high-risk driver.

Even if you had a perfect driving history before your insurance coverage lapse, your insurance company may consider you a high-risk driver when you renew your policy. You’ll pay higher rates than you did before the car insurance lapse.

If you let your car insurance lapse for several months or years, then your premiums may be anywhere from 20% to 50% higher when you renew your policy. In some extreme cases, you may not be eligible for car insurance from your old provider because you’re considered high risk.

What Happens If I’m Caught Driving Without Insurance?

Some people let car insurance lapse because they aren’t driving for a period of time. Other people, however, continue to drive while their car insurance has lapsed.

This is a serious problem: if you continue to drive while your car insurance has lapsed, then you’re driving without car insurance. This is illegal in most states. Some of the penalties for driving without car insurance can include:

• Fines
• Suspension of driver’s license
• License renewal fees
• Status as a high-risk driver, including the required purchase of SR-22 insurance
• Jail time

In the eyes of law enforcement, there’s no difference between driving without car insurance and driving with lapsed car insurance: you’re an uninsured driver regardless. Don’t be fooled into thinking that it’s okay to drive without car insurance.

All of the penalties above fail in comparison to one consequence, however. If you get into an accident while driving with lapsed insurance coverage, then you could face serious consequences. You may be required to pay for all damages – including medical bills and car repairs – out of pocket. This can add up to millions of dollars. Typically, your insurance company would cover these costs to a certain limit. With lapsed car insurance coverage, however, your car insurance company is not required to cover any damages.

Conclusion – Gaps in Insurance Coverage

Ultimately, the consequences of a lapse or gap in car insurance coverage are serious. You’ll face an average of 9% increase in insurance premiums if you let your auto insurance coverage have gaps in it. Therefore, in most cases, it’s in your best interest to maintain continuous car insurance coverage.

Leaving a gap or lapse in car insurance coverage exposes you to serious penalties, including fines, jail time, and accident liability.

For all of these reasons, you should make sure to maintain continuous car insurance coverage and avoid any lapses or gaps in auto insurance.