What to Do for Car Insurance Cancellation for Non-Payment

For most people, going without a car, even for a short period of time, would make life much more difficult. Unfortunately, times can get tough, and you may be forced to miss a car insurance payment.

If there’s any way you can help it, this isn’t a payment you want to skip. You’ll likely have to pay a late fee if you miss your payment date, which will end up costing you even more money. If you further neglect the premium payment, your license can get revoked, your future insurance rates will go up, and your car may get repossessed in the worst-case scenarios.

We’ll go over what happens if your car insurance gets canceled due to nonpayment and what you can do to remedy the situation.

Remember, you need car insurance in every state (except New Hampshire and Virginia) to legally drive your vehicle. If your car insurance policy gets canceled due to your nonpayment, you can’t drive without insurance. You’ll need to find a way to get an active plan as soon as possible. In addition to not being able to drive, these are the consequences of getting your car insurance canceled:

If you anticipate that you’re going to have trouble paying your upcoming car insurance payment, contact your insurance company or agent before it’s due. You may be able to get the deadline extended. Your agent will be familiar with your insurer and recommend the next steps, or they may even be able to work out some sort of partial payment agreement for now.

If you’ve already missed your payment due date without contacting anyone, it’s not the end of the world. Most insurance companies have a grace period after the payment is due before canceling your policy. This grace period ranges in length depending on your provider, but it’s not usually longer than a couple of weeks.

During this grace period, you should reach out to your insurer. You can pay your premium and a likely late fee and then ask to get your policy reinstated. You can only have your policy reinstated by your carrier during your grace period a few times before they get fed up. This is a last resort option and by no means something you should regularly do.

If you don’t end up making any form of payment to your carrier, they’ll cancel your policy. You’ll receive a notice either in the mail (or in your email). The notice will outline steps you can take to solve the issue – like paying. If you don’t, your policy will get canceled.

When your plan is gone, your state’s department of motor vehicles may get involved. The DMV and car insurance carriers often communicate in most states since you need car insurance to drive legally. Insurance companies can notify the DMV when a policy is canceled.

This may take a few days or weeks, but the DMV can revoke your vehicle’s registration if you continue to go without coverage. Also, if the police catch you driving without insurance, your license may be suspended. 

Additionally, you may need to file an SR-22 if you cause an accident without insurance – on top of other legal and financial punishments. SR-22s are for high-risk drivers, and they’re required for severe offenders to get their licenses back. Drivers with SR-22s pay significantly higher car insurance premiums.

If you don’t get new car insurance immediately after your policy gets canceled for nonpayment, your rates will likely go up regardless. A lapse in coverage is a red flag for insurance companies.

Let’s say you miss your insurance payment due date. If you pay during your grace period, your insurer can reinstate your policy without a lapse in coverage. If you don’t pay during your grace period, your provider will likely end your policy.

If this happens, you should start shopping for a new policy as soon as possible. The longer you go without coverage, the bigger question mark this is for providers. 

It means you’ve been driving uninsured or can’t get a new policy for one reason or another. You can experience a rate increase of over 10-15% when trying to get auto insurance after a lapse in coverage, and it can be much more depending on your state and how long you’ve been uninsured.

Another possible consequence of your car insurance cancellation can be a drop in your credit score. This, in turn, will affect your auto insurance score, which is another factor that will drive up premiums for you in the future.

Like your credit score, your auto insurance score is a holistic measure of your ability to pay debts on time. It’s more insurance-focused than your credit score, and it weighs some factors of your personal finances, like borrowing history and timeliness with payments, differently. 

It gives car insurance companies an idea of your level of financial risk. A low auto insurance score is an indication that you could miss premium payments, and you may pay more for car insurance as a result.

If you’ve only missed your payment due date by a few days, you can likely pay your premium and have your policy reinstated, as long as you pay within your car insurance grace period. If you miss the grace period, your insurer may be less willing to reinstate your auto insurance.

 Your carrier will give you notice of an upcoming termination before it happens. Check your mail and email. You could also get a phone call. The notice will also likely outline what options you can take to extend your policy, including how to go about reinstatement.

Grace periods vary by state and by company, which is why it’s so important to communicate with your provider. Your reputation may also come into play. If you’ve been a loyal policyholder for several years without incident, or if you have a good relationship with your insurance agent, your chances of getting reinstated after the grace period may be higher.

But, if you can’t get reinstated, you’ll need to get new car insurance as soon as possible. Letting your lapse in coverage go on for any longer than it needs to will only harm you in the long run.

You should always compare multiple policies from different providers when looking for auto insurance coverage. At Clovered, we make this easy.

You can submit our car insurance quote form and indicate that you’ve had a lapse in coverage at the bottom after entering some basic information and policy desires. Then, one of our licensed agents will get back to you as soon as possible with your options for new insurance.