Auto Insurance Coverage Lapse and Reinstating a Policy

Have you missed an auto insurance payment?

Life happens. The car breaks down, the kids get sick, an appliance fails. When the insurance bill arrives, you have every intention of paying it, but somehow you forget. The next thing you know, a cancellation notice arrives. You plan on delivering the payment in person to your insurance professional, but yet again, Murphy’s law intervenes and daily life gets in the way.

Coverage lapse

A few weeks later, you’re involved in an auto accident. When you call your insurance professional, you’re told a notice was sent before coverage was canceled. You have no insurance and the policy can’t be reinstated to cover the loss.

Unlike a missed cellphone payment, with auto insurance, there is typically no grace period. Your policy will expire at 12:01 a.m. following the expiration date if you miss the payment. While there may be some insurance companies that allow their customers to delay payments by a few days, you should contact your insurance professional before a delayed payment happens to see if this option is available to you.

If your vehicle is financed and there is a lapse in coverage, a lender may purchase an insurance policy to cover the vehicle and bill you for it. If the insurance premium remains unpaid, your lender may repossess the vehicle.

Reinstating a policy

Reinstating an insurance policy isn’t like reinstating your cable TV, with a flip of a switch. 

Many insurance companies are not willing to reinstate policies after the cancel for non-payment. This is true even with no losses or good payment history. This is a change from previous years. If you are going to be away or unable to have access to your billing notices for an extended period of time, please reach out to your trusted insurance professional to discuss tools that could help mitigate any billing issues in that situation.

While your insurance company can issue a new policy starting the next day, you will still show a lapse in coverage. And any losses that happened during that time will not be covered. There may also be a fee associated with reinstating your policy. In addition, your insurance company may raise your premiums on the newly issued policy.

Your insurance company will backdate your coverage only when you have signed a document stating you’ve had no losses during the coverage lapse. Backdating is particularly important in auto insurance policies because many states require drivers to maintain continuous insurance coverage. A coverage lapse could result in a penalty and the potential for license and registration suspension. In addition, most states assess fees for reinstating driver’s licenses and registrations.

Typically, missed premium payments are handled the same way in all lines of insurance. Most insurance companies offer several different payment plan options for your convenience, such as paying on a monthly, quarterly or yearly basis.

If you’re concerned about potentially missing an auto insurance payment and would like to discuss the payment options available to you, contact your insurance professional and begin the discussion sooner rather than later – before that ball gets dropped – to avoid any negative repercussions.

For more information

If you have questions about auto policies, reach out to our Personal Insurance team to learn more.

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.

Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.

Written content in blog post: Copyright © 2020 Applied Systems, Inc. All rights reserved.