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Auto insurance evaders face high premiums
At some point, you may find that you don’t need to drive your car anymore. Maybe you’re living in a large metropolitan area with easy access to public transportation. Or you ride your bicycle to work for exercise. If you’re not driving, you could neglect to pay your auto insurance bill.
Others may intentionally ignore their car insurance bills but keep driving because of tough financial times, poor driving records or indolent attitudes.
And still others simply forget to pay.
But letting your car insurance lapse will generally make it harder for you to find affordable car insurance rates in the future.
Lapses in coverage could mean higher car insurance rates
When you allow your auto insurance to lapse, even for a day or two, and then shop for insurance, you may find that your car insurance quote is unusually high -- or you’re not offered coverage at all. Although many car insurance companies will overlook a lapse of a few days, most take a long, hard look at applicants who have had a lengthy gap in coverage.
"Historically speaking, people who drive without car insurance ultimately submit more claims once they purchase coverage," says Elizabeth Stelzer, communications consultant with Nationwide Insurance. "As a result, most carriers charge a higher premium to reflect the anticipated higher cost for this group. However, this is not necessarily true for consumers who went without insurance because they did not have a need for the coverage [because they] did not own a car or were out of the country on military duty."
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Car insurance companies also will take notice of a series of small lapses that might indicate that you’re often unable to pay your car insurance bills on time. Chances are that those serial lapses will cost you money in the long run. If your car insurance rates increase due to your lapses, you'll find it would have been cheaper to have kept your insurance active, says Stelzer.
In many states, if your car insurance lapses, your insurer will notify your state’s department of motor vehicles. If you allow it to lapse, you could face a fine or a suspended license. In some states you'll be ordered to attend an administrative hearing, and if you don't get your insurance reinstated, you could lose your ability to renew or register any motor vehicle.
How car insurance companies react to lapses
If you try to buy new auto insurance, car insurance companies will try to determine why you had a lapse in your coverage. If the reason for your lapse is a good one – like you moved to a city and didn't own a car for a few years – there’s no reason you can’t get a good rate.
They'll ask you to explain the lapse, but they also will check your driving record and your C.L.U.E. (Comprehensive Loss Underwriting Exchange) report, which shows recent claims you’ve made for home and auto insurance. Stelzer says that there are similar databases that track continuous insurance coverage.
But lacking a good reason for going uninsured, a lapse could haunt you with higher premiums for anywhere from six months to three years, depending on the insurer. Each decides how long it will take to "forgive" a lapse, Stelzer says.
If you lapsed your insurance but kept driving, don’t let the prospect of high car insurance rates compel you to continue driving uninsured. Shop around among several insurers to compare auto insurance quotes.
Also, “select coverages that you are most likely to be able to keep in place," Stelzer advises.
It's also important to come clean about your gap in coverage; withholding relevant information is fraud and could lead to your policy being dropped by the insurer.
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