How to Avoid a Lapse in Car Insurance Coverage

As a driver, you’re required by law (in nearly every state) to maintain continuous coverage, and for good reason. Any period of time when you don’t have an active insurance policy is called a lapse in coverage—which can have both legal and financial repercussions. 

Why does the law require you to stay covered? Because car insurance doesn’t just help protect you and your car if you have an accident, it also protects other drivers and damages you cause them if you’re the one who’s found responsible for the accident. 

Read on for tips on how to steer clear of a car insurance lapse.

What is a car insurance lapse?

If you own or lease a car, a coverage lapse is any period of time that you aren’t insured. There are several situations that could lead to a lapse in coverage, including:

• Late or missed payments
• Canceling your current coverage before your new policy starts when you switch car insurance companies   
• Not renewing your car insurance policy, or failing to buy a new one, when your old policy expires
• Providing your insurance company with incorrect information
• Not updating your insurer when your life circumstances change—like moving addresses, or buying a new car
• Not following the terms and conditions of your car insurance policy

What can happen if I let my car insurance lapse?

Being in lapse can have some serious repercussions on your driving record (and wallet), including: 

• Liability: If you are involved in a car accident while uninsured, you may be liable—aka have to pay out of pocket—for any property damage or medical bills that result from the accident.
• Higher car insurance rates: Insurance companies may view you as a high-risk driver and increase your insurance premiums when you try to get a new policy, or deny you coverage altogether.
• License suspension: Some states may suspend your driver’s license if you are caught driving without insurance.
• Registration suspension: If your state’s DMV finds out you are driving without insurance, they may suspend your registration.
• Reinstatement fees: If your license or registration is suspended, you may have to pay reinstatement fees to get them reinstated.
• Jail time: In some states, driving without insurance can result in fines, and even jail time.

How can I avoid a lapse in coverage?

It’s crucial to avoid policy lapses. Fortunately, there are several ways to maintain continuous coverage.

Never cancel your policy before starting a new one

If you decide to switch car insurance—whether that’s mid-term or at renewals—buy your new policy first, and make sure the date that your new policy goes effective is the same day that your old policy’s coverage ends.

Pay your premiums on time

Missing a payment is one of the most common causes of a car insurance lapse. Make calendar reminders for when you need to make payments, or set up automatic payments, to avoid missed payments. At Lemonade Car, you can easily set up automatic payments when you buy a policy. 

Keep your insurance policy accurate and up to date

As life circumstances change—like moving addresses, or buying a new car—make sure to update the details on your policy to reflect that. When you drive with Lemonade Car, for example, you can easily manage your account details, and so much more, all on the Lemonade app. 

Understand your policy

Take the time to read through your policy carefully, familiarize yourself with what is and isn’t covered, and what your responsibilities are. 

Renew your policy on time

Check the expiration date of your policy and make sure to renew your car insurance before it expires. At Lemonade Car, most policies are eligible for automatic renewal every six months, and we’ll send you a renewal notice via email well in advance of your policy’s end date, usually about 30 days before.

Keep in mind: Maintaining continuous coverage is important only if you own or lease a car. So if you decide to sell your car to pursue your dream of being a full-time cyclist, for example, there’s no need to have car insurance when you don’t have a car. But if you decide to ditch your two wheels and buy a new car a year later, you’ll need car insurance again. Also, if during your driving hiatus you’re occasionally borrowing your roommate’s car to stock up on toilet paper and protein bars at Costco, you should probably be a listed driver on their policy.  

What is a car insurance lapse grace period?

Depending on your insurance company and policy type, you’ll have a bit of time—typically 7 to 30 days—after your monthly premium is due to pay off your outstanding balance before your policy goes into a lapse. This extra time is called a grace period.

During this window, your coverage will still be active, and you’ll still be protected in case of an accident or other covered incident.

Keep in mind that you might be charged a late fee, or a higher premium, if you make a late payment, even if it’s during a grace period. 

And if you don’t make the payment by the end of the grace period, your policy may be canceled, and you could be left without car insurance coverage.

A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states.