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What Happens When Your Car Insurance Policy Lapses and You Have an Accident?

woman sitting outside of vehicle after accident holding her head

Driving without car insurance is never going to be a good idea and having an accident while uninsured is pretty much as bad as it gets. You’ll most likely be out some significant money and your ability to buy auto insurance at a normal rate may be in jeopardy. You will face a citation – and depending on the severity of the accident and whether or not you were at fault, you may even be looking at some time behind bars. 

The financial ding you will take – especially if the accident is your fault – will be significant. In some states, even if the accident is not your fault, if you are driving uninsured the ramifications are surprisingly harsh. 

Known as the “No Pay, No Play” law in Alaska, California, Indiana, Iowa, Kansas, Louisiana, Michigan, Missouri, New Jersey, North Dakota and Oregon, uninsured drivers who get into an accident cannot collect certain amounts of money from the other driver’s insurance – even if the accident is not their fault. 

For example, in Louisiana, uninsured drivers cannot collect the first $25,000 of property damages and $15,000 of personal injury damages if they get into an accident, regardless of whether the accident was their fault. More states are seriously looking at implementing variations of the “No Pay, No Play” law. 

If your policy lapses for even one day because you failed to pay your car insurance premiums on time and you get into an accident, it’s going to an expensive mistake. 

Don’t I Have a Grace Period to Pay My Car Insurance? 

The grace period after a car insurance lapse can vary greatly from one insurer to another. And state laws differ. You could have as little as a one-day grace period or as much as 30 days. On average, you might have ten days. But in some situations, you’ll have no grace period whatsoever. 

What if you don’t know exactly how much grace period you have? Insurance companies don’t always go out of their way to publicize that information. What if you let that extended time get away from you? It can be dangerous to rely on grace periods to pay your policy because they’re too easy to miss. 

So What Happens if My Car Insurance Policy Lapses? 

If you’re a good customer, your insurance agent might reinstate your coverage as soon as your payment is received. But if you’re already a high-risk customer because of your driving record or other factors, your insurer might refuse to reinstate coverage. 

Even if you haven’t been classified as high risk, a lapsed policy payment might put you in that dreaded category. And you could be required to pay your insurer a financial penalty for reinstatement. 

If you get stopped by the police before your policy is reinstated, you might have to pay a fine or even get your license suspended. And even if you’re only without coverage for a day or two, an accident over that period could be financially ruinous if you’re the at-fault driver. So lapsing is to be avoided at all costs. 

two cars in accident on road

5 Ways to Deal with Insurance Policy Lapse After an Accident 

If you think being an at-fault driver in a car accident is bad, the aftermath can be worse. That’s when your insurance agent gives you the bad news that you no longer have coverage. Here’s what to do (or at least try) if you get into a car accident with lapsed coverage. 

1. Immediately Make the Policy Payment if You Still Can 

At least that will put you in better graces with your insurance company when you must make your claim. And if they accepted your late payment, you might have a case for being covered. 

2. Call Your Insurance Agent 

You’ll do this as soon as you’ve made your late payment. If you’ve been a good customer for a number of years, your agent might accept your claim even if you were technically not a customer when the collision happened. Make your case and cross your fingers. 

3. Stay Honest 

The temptation might be to fudge certain details, such as when the accident occurred. Not only is that ethically and criminally wrong, but the police report which you must send your insurer will contain different information. The best way of getting your claim rejected is with an attempt at insurance fraud. 

4. Consult a Lawyer 

That’s an option if all else fails. Yes, it’s likely to be expensive, but if you’re looking at the probability of being financially responsible for thousands of dollars in damages and even medical costs as the result of a fault accident–not to mention potentially stiff legal penalties–you might not have many choices but to fight. 

5. Avoid the Risk of Car Insurance Lapse Before it Happens 

Here’s the best tip of all: always pay your car insurance premium when due. If paying online, consider setting up auto-pay, so you don’t even have to think about it. If you’re usually late because it’s a financial challenge to pay bi-annually, see if you can set up much lower monthly payments. And never ignore due date notifications from your insurer. 

Find Affordable Car Insurance Quotes Online Today 

We’re here to help. Call your independent Freeway Insurance agent at (800) 777-5620 or get a quick quote online. You can also find a Freeway office near you

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