It’s that time of the month again – time to pay the bills. Of course, it’s important to pay all of your bills in a timely fashion, including your car insurance premiums. But what happens if you’re strapped for cash and you can’t make the payment on time?
A lot of car owners are under the assumption that they can safely pay their auto insurance a few days late because there is a grace period. While the grace period rule may be true in some states and for some insurance providers, it’s in your best interest to pay your premiums on time. In some cases, paying your insurance premiums a little past the due date may be alright; however, it’s best not to get into the habit – or even do it just one time – because the consequences could be disastrous.
Car Insurance Bills and Grace Periods
While it is true that some auto insurance providers will not cancel your coverage if your payment is just a day or two late; but, it’s important to understand that they do have the right to do so.
Some car insurance companies do offer a grace period for their clients; but generally speaking, they are not obligated to offer any extended amount of time for premiums payments. And, if your insurance provider does offer a grace period, chances are that you are going to end up paying the price of making a late payment in the form of late fees. In addition to paying the agreed upon amount for your premiums, you will likely be charged a substantial late fee. Furthermore, there is a strong possibility that your premiums will be increased, which means even higher payments in the future.
What Happens if You Make a Late Payment?
Essentially, auto insurance coverage is a deal that you, the insured, makes with your provider. You give them money and they get you coverage. In the event that you are involved in an accident, your car insurance company will help to pay for any damages that are covered by your policy, and in exchange for the coverage they provide, you are required to pay an agreed upon premium.
If, however, you fail to make a payment, then your auto insurance provider reserves the right to cancel your coverage because you didn’t hold up your end of the deal. Car insurance is a business, and when you do business with any company, you are expected to make the payments that are agreed to in a timely manner.
If you pay your car insurance late, even if it’s just a few days, you could end up facing severe consequences, including:
- A lapse in coverage. If your payment is not received on-time, your insurance coverage could lapse. In other words, your policy may be cancelled, which means that you will not have coverage. If you are caught driving without the minimum amount of coverage that is required in your state, the ramifications could include a marred driving record, which could lead to a suspended license, extensive fees, and possibly even jail time.
- Financial hardship. Of course, if you are driving without insurance and you are involved in an accident, you could end up facing serious financial hardship. If you are at-fault, you will be responsible for paying the damages out of your own pocket. Add to that the fact that you will be hit with hefty fees because you were driving without coverage and the results can be financial devastating.
- Sent to collections. Car insurance companies can and will send bill delinquents to collections. Typically, your insurer will try to collect your payment for at least a moth before sending your account to a collection agency. Having a report on your credit history from collections can severely impact your credit score, so it is crucial to always pay your car insurance bill on time.
- High-risk driver. If you fail to make payments on your premiums and your insurance lapses, chances are that you will be labeled a high-risk driver. The reason? – Because insurance companies are counting on you to pay your premiums on or before the due-date. If you fail to do so, you are considered a high risk because you are not reliable.
- Higher premiums. Being labeled a high-risk driver can end up costing you a tremendous amount of money. Drivers that are deemed a high-risk end up having to pay high fees.
- Denied coverage. There is a chance that you might not be able to find future coverage at all. If you make several late payments, your insurance lapses, or you are caught driving without the minimum coverage, car insurance providers may not be willing to issue you a policy at all.
The Bottom Line
While some car insurance providers may offer a grace period for premium payments, it’s in your best interest to assume that the grace period doesn’t exist. The repercussions of making a late payment can be devastating.
To avoid making a late payment, speak to your insurance company to find out if you can have premium payments automatically withdrawn from your bank account on the due date. Additionally, always make sure that you have the funds in your account several days in advance of the due date to avoid potential problems.