What To Expect If An Insurance Policy Lapses

Jun 30, 2023

When a policy lapses, it has expired or gone into default. Many factors can cause a lapse, but they all suggest a violation of the contractual obligations between the insured individual and the insurance company. The most common causes of a lapse are: 

  • The policyholder’s failure to fulfill their payment obligations has resulted in a lapse in their insurance policy. 
  • The policy has been canceled by the insurer due to some violation of the terms and conditions by the insured. 
  • Nonrenewal occurs when the insurance company declines to renew a given policy. 


What Happens When A Car Insurance Policy Lapses? 

If your policy lapses, it implies you have a gap in coverage. Not having insurance could result in the cancellation of your insurance protection and the imposition of penalties. Furthermore, your policy may be canceled by your insurer, rendering it impossible to reinstate and requiring you to seek a new plan. 

This is frequently more expensive than just renewing a current one. When shopping for a new vehicle insurance policy, you may potentially face increased prices because insurance companies view a lapse in coverage as a risk factor. 


Do I Have To Pay A Late Fee If My Insurance Policy Lapses? 

A policy that has been allowed to lapse and incurs fees for late payment or renewal can result in high costs. The policy for your car insurance will become invalid if the premium is not paid on time. Some insurance companies charge late fees on policies that lapse; others do not. Late fees can be anywhere between $10 and $25 for the primary missed payment, with $10 charged for every subsequent month. 


How Can I Avoid Letting My Policy Lapse? 

Maintaining awareness of payment deadlines and having enough money in your bank account can help you avoid an insurance lapse. If paying a high premium is a challenge, consider opting for insurance with cheaper rates and a larger deductible. In case you’re unavailable when a payment is due, consider arranging automatic payments or modifying the due date to ensure timely deduction from your account. 


Keep Your Insurance Active, Especially If The Law Mandates it 

To maintain your insurance coverage, especially if it’s legally required (such as auto insurance), you must take the initiative. It’s critical to recognize that handling renewal payments will be your responsibility the majority of the time.   

Your insurance policy may require renewal every 6 months, necessitating payment of the premium to maintain coverage. To clarify any confusion regarding the termination or expiration of your insurance, it’s wise to contact your agent. 


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