Car Insurance The consequences of late car insurance payments Written by: Penny Gusner Penny is an expert on insurance procedures, rates, policies and claims. She has extensive knowledge of all major insurance lines -- auto, homeowners, life and health insurance. She has been answering consumers’ questions as an analyst for more than 15 years and has been featured in numerous major media outlets, including the Washington Post and Kiplinger’s. Read full bio >> | Reviewed by: Michelle Megna Michelle, the former editorial director, insurance, at QuinStreet, is a writer, editor and expert on car insurance and personal finance. Prior to joining QuinStreet, she reported and edited articles on technology, lifestyle, education and government for magazines, websites and major newspapers, including the New York Daily News. Read full bio >> | Updated on August 28, 2015 Why you can trust Insure.comQuality VerifiedAt Insure.com, we are committed to providing honest and reliable information so that you can make the best financial decisions for you and your family. All of our content is written and reviewed by industry professionals and insurance experts. We maintain strict editorial independence from insurance companies to maintain our editorial integrity, so our recommendations are unbiased and are based on a comprehensive list of criteria. It’s a week until payday. You’re running short of money, so you put your car insurancebill in the “this will have to wait” pile. If you believe you’re paying too much for auto insurance now, wait until you see the consequences for your late payment. Even if you’re only a day late with your premium payment, your insurance company likely has the right to cancel your policy. Also, the company won’t necessarily reinstate you once it gets your overdue money. Furthermore, once your affordable car insurance policy has been canceled, you may find yourself paying more money for a comparable policy or — worse yet — having trouble finding car insurance at all. Can they cancel your insurance coverage? Each state has rules governing when an insurance company may drop your policy. An insurance company will almost always be able to cancel your policy in the middle of its term — as opposed to not renewing it when it expires — if you fail to make a payment on time. Furthermore, on-time payment usually means your premium must be received by the due date. Dropping the payment in the mail by the due date isn’t good enough. Most auto insurers value your business and won’t drop you if you’re a few days late. Some companies, however, may seize the opportunity to kick you off their rolls if you’re habitually late with payments or if they decide that you’re a risk they no longer wish to insure. If you’ve passed the cancellation date, an insurer may require that you pay the remaining balance due for the full term before they reinstate your insurance. No grace period for car insurance Many drivers mistakenly believe that there is a grace period for paying car insurance premiums. While many health and life insurance policies afford a grace period of 30 days — and state law sometimes mandates those grace periods (in New York, you have 31 days) — auto insurance usually doesn’t work that way. If you’re late in paying your car insurance premium, you’re at the mercy of your insurance company. State insurance laws will, however, prescribe the number of days’ notice that you’re entitled to before the cancellation takes effect. But that’s little consolation when you’re on the verge of losing insurance. Many drivers mistakenly believe that there is a grace period for paying car insurance premiums. You may have gotten away with paying your auto insurance a few days late in the past, but don’t count on your auto insurer being understanding forever. In many cases, the person canceled will complain to the state insurance department, arguing that the insurer always accepted late payments in the past. Although state insurance regulators are able to resolve many complaints, they may not be able to help someone who fails to pay premiums in a timely manner. Shopping for new insurance isn’t easy if you’ve been canceled When you apply for a policy with a new insurance company, it will check to see if you’ve been canceled for nonpayment of premiums with your former insurer. If that’s your case, it may not want to insure you — even if your driving record is spotless. Or it may not allow you to purchase insurance through an installment plan, insisting on one annual payment instead. Many insurance companies also take credit history into account when setting their prices. Their underwriters believe that people with bad credit are more likely to become involved in accidents. (Credit scoring, as it’s called, has been criticized as being discriminatory to the poor and minorities, but most states allow it.) In a worst-case scenario, you may find that you’ll have to buy auto insurance from a “nonstandard” or high-risk carrier. These companies accept “less-desirable risk” clients (usually with tarnished driving records). You’ll always fare better if you can find coverage in the preferred or standard market. Drivers classified in the preferred category pay the lowest premiums. On the other hand, if your driving record isn’t perfect and you’re viewed as a bad credit risk, your only option may be your state’s last-resort auto insurance program (often called the assigned risk plan). Bite the bullet and tell the truth When you apply for a policy from a different company, you should answer truthfully about why your previous policy was canceled. In many states, an insurance company has 60 days after it issues your policy to investigate whether you’ve told the truth. If you’ve fibbed on your application and the insurer finds out, your policy can be canceled. If it’s time to shop for new car insurance, you can get quotes from the best car insurance companies as ranked by policyholders.