In most states, driving without insurance is illegal and can expose you to the risk of being sued and having loans to cover the costs of damages incurred in an accident.
Hence, the purpose of auto insurance companies is to provide funds to cover your damages. The monthly fees you pay depends on numerous factors such as age, your experience, and how frequently you drive. All these factors together determine the probability of you having an accident. If you have an at-fault accident, your insurance company will cover the costs of damage to the other party, where you don’t have to pay out of your pocket.
Also, if you stop paying the monthly payments, there will be no reason for the insurance company to cover your accidents. If you didn’t pay your monthly, quarterly, or yearly fees, you aren’t profitable for the insurance company, and the coverage amount they pay you will be a loss for them.
Thus, it will result in the cancelation of your insurance policy. Remember driving without having an insurance policy might have severe consequences, especially if you are involved in an accident. Moreover, you might also get charged for not having auto insurance.
What Happens When You Stop Paying for Auto Insurance?
It is common knowledge that it is crucial to keep paying auto insurance, but unfortunately, it is not easy. The financial strains one might face goes beyond our control, and sometimes we aren’t able to pay, or the payment gets rejected by the bank. It can happen to us being oblivious to the situation.
In case you miss a payment, the insurance company doesn’t cancel your policy right away. Instead, they notify you about your missed payment and provide you the opportunity to make the payment. It is a legal requirement in every state.
Once you missed the insurance payment, you will be notified about the period within which you must make a payment, or your policy might get canceled. The time given to pay depends on the insurance company, but it is usually between 10-30 days. However, if you still fail to make payments within the notified period, your policy will cancel. After this insurance company notifies DMV, they will probably suspend your driving license or even seize your vehicle.
Some Car Insurance Tips
In most scenarios, when insurance companies cancel your policy, they give you a chance to renew your policy and pay for the period you missed. However, backdating insurance is illegal, but it is legal if you are simply paying for the gap you missed. You also need to fill a form that states that you had no accidents in the cancelation period of insurance. Remember, you will only have 30 days to do it after the cancelation of the policy. Insurance companies, of course, have a right to reject your request if you seem like an unreliable customer.
How to Avoid Car Insurance Lapse
Driving without insurance is a crime, and if a lapse occurs in auto insurance, you might be in severe trouble. To be cautious, have a separate account for paying the bills and deposit essential bill payments in that account at the start of every month. Always have some extra money saved for a rainy day contingency fund. You can also consider having an overdraft agreement with the bank.
A much better option is to pay for auto insurance in advance. If you pay upfront for the insurance, you won’t have to worry about paying each month or quarterly. Moreover, you will be able to save a considerable amount by purchasing in bulk.