Paying Car Insurance Late: What Happens?

December 9, 2019

It happens to the best of us – you realize after the fact that you missed your car insurance due date. What does this mean? Do you automatically lose your insurance coverage?

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Fortunately, many insurance companies don’t cancel your policy immediately, but you must get caught up quickly or you could find yourself without coverage.

You May Have a Grace Period

Most insurance companies provide a grace period. It starts the day after your due date and lasts for a specified period – typically between 10 and 30 days. If you don’t make your payment during that time, that’s when trouble starts.

The grace period is there ‘in case’ you forget to make your payment. Don’t make a habit of using it, though. While you’ll still have insurance, most companies charge a late fee if you don’t pay by the due date.

The Risks of Unpaid Car Insurance

Not paying your car insurance puts you at risk for many issues including the following:

You Can Lose Your Insurance

If you don’t make your payment before the grace period expires, you could find yourself in a bit more trouble. Many insurance companies cancel your policy on midnight of the day the grace period expires. If a company doesn’t give a grace period, the policy lapses as soon as you miss the due date.

You don’t have to worry about collectors knocking on your door for unpaid car insurance, though. You pay car insurance for future use so there isn’t an unpaid debt. But, if the insurance company cancels your policy, you break the law. You aren’t supposed to drive without insurance. The stakes are even higher now.

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You May not Have Coverage if you are in an Accident

If you get involved in an accident while you are behind on your payments, the insurance company may not cover the damages. This could be the case even if you are within your grace period. The law varies by state, but it’s important that you avoid this situation if you can. Paying your insurance premium is likely a lot less expensive than being stuck with the repair bill or hospital bills from an accident.

Your Premiums May Increase

Car insurance companies can change your premiums at every renewal. They look back at your risks including your payment history. If you have a habit of missing payments or paying your premiums late, insurance companies may charge you inflated premiums at renewal to make up for the risk.

The Insurance Company May Not Renew Your Insurance

Auto insurance renewal isn’t a guarantee. Just because you have coverage with an insurance company now doesn’t mean they’ll renew your policy on the next term. The insurance company has the right to cancel your renewal. Now you must shop around to find another policy. Don’t assume that new agencies won’t know about your late payments, though. There’s an insurance database that insurance companies report to – it can include data about your late or missing payments.

While you may find insurance elsewhere, it will likely come with much higher premiums and lower coverage. Insurance companies are all about risk. They evaluate your risk of non-payment as well as your risk of filing a claim. Both issues are costly for insurance companies, making it harder for them. They’ll calculate your premiums accordingly.

Make Your Payments on Time

Make your insurance payments on time to avoid any of these worries. Paying a few days late isn’t a big deal (in most cases), but it will cost you more money. If you do fall behind, get in touch with your insurance company right away. Know your cancelation date because insurance companies stick to that date religiously. You could find yourself without insurance in an instant.

Always read your policy’s fine print. Know the due date and grace periods. Pay your premiums on time and you’ll have coverage. Don’t assume you’ll automatically have renewed insurance either. In fact, if you shop around before renewal, you may even find better rates than you currently pay.

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