What Happens If My Car Insurance Lapses?

By the Mercury Team

Whether you missed a payment or canceled your policy in search of a better deal, there’s a chance you might experience a lapse in auto insurance coverage. What does lapse in coverage mean? In this article, we’ll break down exactly what a lapse is, why it happens, and what it could cost you.

What Is an Insurance Lapse?

A lapse in auto insurance means there’s a period where you don’t have any active car insurance policy protecting you or your vehicle. Essentially, you’re driving uninsured, which can lead to serious legal and financial consequences.

Lapses can happen for several reasons:

• Missed payments: If you don’t pay your premium on time, your insurance company can cancel your policy after a short grace period, leaving you without coverage.
• Policy cancellation: Besides missed payments, your insurance might get canceled for reasons like multiple traffic violations, providing false information when you signed up, or having your driver’s license suspended. Once your policy is canceled, you’re uninsured until you get a new one.
• Switching insurance providers: Many people end up with a lapse when switching auto insurance companies and forget to make sure their new policy starts the same day their old one ends. Even a single day without coverage counts as a lapse, so it’s important to line everything up carefully.

Immediate Consequences of Lapses

When your car insurance lapses, the effects can be immediate and serious. Here’s what you need to know:

Loss of Coverage

As soon as your insurance lapses, your policy is no longer active. That means you’re not protected if you get into an accident, your car is damaged, or you cause damage to someone else’s property. Without coverage, you’ll have to pay for repairs, medical bills, and other costs out of your own pocket.

Driving Without Insurance Is Illegal

In almost every state, it’s against the law to drive without car insurance. If you’re caught behind the wheel without coverage, you could face expensive fines, points on your driver’s license, or even have your license and vehicle registration suspended.

Policy Cancellation

If you don’t make your payments or if your policy lapses for another reason, your insurance company will officially cancel your policy. This cancellation stays on your record and can make it harder and more expensive to get insurance later on. Why? Insurers typically see a lapse as a red flag that you might be a higher-risk driver, which means you could pay a lot more for coverage in the future.

Legal and Financial Penalties

Car insurance lapses can lead to legal and financial penalties. Here’s what to keep in mind:

State Penalties

Depending on your state, getting caught can mean expensive fines, points on your license, or even suspension of your license or vehicle registration. For example, in Texas, if you’re pulled over without proof of insurance, you’ll likely get a ticket, and the court can fine you up to $350 for a first offense. If you’re caught again, the fine can jump to as much as $1,000, and you could even have your driver’s license suspended.

Reinstatement Fees

If your insurance lapses, you’ll probably have to pay a reinstatement fee (usually between $50 and $150) to get your coverage back. Plus, you’ll need to pay any missed premium payments, and some insurers won’t restart your policy until you’ve paid it all.

SR-22 Requirement

In many states, if you’re caught driving without insurance, you might need to file an SR-22 form—a document that proves you have active insurance. Needing an SR-22 typically means you’re considered a high-risk driver, which can lead to much higher insurance premiums and extra administrative fees just to keep your license valid.

Legal Exposure If You’re in an Accident Without Insurance

If you cause a crash without insurance, you take full responsibility for paying all medical bills, car repairs, and legal expenses. These costs can quickly climb into the tens or even hundreds of thousands of dollars, especially if someone suffers serious injuries. Also, the injured parties can sue you, and the court can garnish your wages or seize your assets to cover the damages.

Long-Term Impact on Insurance Costs

Letting your car insurance lapse can cost you a lot more money down the road. Here’s what can happen:

Lapses Raise Your Future Premiums

When your insurance record shows a gap, insurers see you as a riskier driver. Because of this, they may charge you much higher premiums when you try to buy a new policy. Even a short lapse can lead to rates that are hundreds of dollars more per year compared to what you’d pay if you had kept your insurance active.

Loss of Discounts for Continuous Coverage

Many companies reward you with auto insurance discounts if you keep continuous coverage without any gaps. But if your policy lapses, you lose those valuable savings, and that can make your coverage more expensive when you reinstate your policy or shop for new insurance.

May Impact Eligibility with Some Carriers

A lapse can even limit your options for buying insurance. Some carriers won’t sell policies to drivers who’ve let their auto insurance lapse, especially if the gap lasted more than 30 days. This may force you to buy from a high-risk insurer, where premiums are typically much higher.

What to Do If Your Insurance Lapses

If your car insurance lapses, you can get back on track. Here’s what to do to fix the situation and avoid bigger issues down the road:

• Contact your insurance company immediately: The first step is to call your insurance company right away. They can walk you through what happened, tell you exactly when your coverage ended, and explain what you need to do to get insured again.
• Ask about reinstating your policy: Ask if you’re still within the grace period—a short window after your payment is due. If you’re eligible, you may need to pay any missed premiums and a reinstatement fee, but you could keep your same policy without starting over.
• Don’t drive until you’re covered: Driving without insurance is illegal in almost every state and can lead to serious fines or even license suspension. Stay off the road until your policy is reinstated or you have a new, active policy.
• Shop around if your rates go up: If your current insurer raises your rates because of the lapse, it’s a good idea to compare quotes from other companies. Some insurers specialize in helping drivers who’ve had a lapse, and you might find a better rate elsewhere.

How to Prevent a Lapse in Coverage

A few simple steps can help you keep your coverage active and your mind at ease:

• Set up autopay or payment reminders: A lot of policies lapse just because people forget to pay. Autopay can handle your payments automatically, so you’re always on time. If you like paying manually, try setting calendar reminders or signing up for payment alerts from your insurer to avoid missing a due date. Some carriers even offer an autopay discount.
• Avoid gaps when switching insurance companies: Switching insurance companies? Don’t let your old policy end before your new one begins. A quick call to both insurers can help you line up start and end dates perfectly so you stay covered every single day without a lapse.
• Bundle your policies for better pricing and stability: When you bundle your auto insurance with homeowners or renters insurance, you can save money and lower the chance of missing a payment. Many insurers give discounts for bundling, and having one combined bill makes managing payments easier.

Reinstating Your Policy with Mercury Insurance

If your Mercury Insurance policy lapses, don’t worry. You can quickly get your coverage back on track. Contact Mercury right away to pay any overdue premiums and fees so we can reinstate your policy.

We typically give you a grace period so you can catch up without losing your coverage entirely. The length of your grace period can vary, so it’s best to call Mercury’s billing team at (800) 503-3724 to see where you stand.

If you can’t reinstate your old policy, Mercury can help you find flexible, cheap car insurance options for a new plan so you can get back on the road with peace of mind.

“At Mercury, we realize customers can miss payments or go through tough times. That’s why we’re here to help you get back on track quickly with a reinstated policy or a new plan that fits your needs,” says Sylvie Widjaja, Regional Sales Director, Mercury Insurance.

Final Thoughts

Keeping your car insurance active without lapses is one of the best ways to protect yourself, your finances, and your peace of mind. But if your policy does lapse, Mercury is here to help you get insured again quickly and easily. Contact us today for a fast, free quote!