What Happens If You Miss a Car Insurance Payment?

If you miss your car insurance premium payment by a few days, you may still be covered under your insurance carrier’s grace period. Depending on how you receive communication from your insurer, you may have gotten (or will get) a notice via email or snail mail that your coverage is past due. However, contacting your insurance company once you’ve realized your payment is late can help you avoid fees, policy cancellation, and more severe consequences.

Some states prohibit car insurance companies from acting on lapsed coverage if you miss a payment due to job loss, military service, or hospitalization. In others, insurance carriers notify the local Department of Motor Vehicles (DMV) when your car insurance lapses because a lack of coverage keeps you from legally driving on public streets. If you’re caught driving without insurance, your license and registration may be revoked depending on local laws. 

Financed vehicles pose the additional risk of repossession based on terms specified within the agreement. Most lenders require specific levels of car insurance coverage, and lack of that particular coverage can result in repossession or what’s known as forced-place insurance. This costly type of car insurance policy aligns your insurance with state minimum requirements and any additional requirements as called out in the finance agreement. 

Obtaining car insurance after losing coverage due to a missed payment can also be costly. Auto insurance companies may institute a reinstatement fee or increase your premium if they choose to cover you again. If not, you may have to work with a high-risk insurance company that charges higher rates. Late auto insurance payments can also affect your ability to obtain car insurance coverage in the future.

A car insurance lapse grace period represents a period in which any payments that are made past the original due date are considered on time. Many lenders offer grace periods to allow borrowers a few days to make a payment if something comes up and they miss the original due date. Grace period time frames vary by car insurance provider. 

Auto insurance policy agreements typically list how many days a grace period consists of. You can find the grace period listed under coverage details, similar to where you’d find out if your car insurance covers rental cars. In addition, insurance carriers may also limit how many times you can leverage your grace period before the privilege is revoked. If you continually rely on grace periods to pay your car insurance premium, arranging a new payment due date may be worth discussing to suit your budget better. 

Coverage depends on the individual situation when you miss a car insurance payment. The at-fault party's car insurance should cover any costs if you’re deemed not at fault for a car accident. Your carrier isn’t obligated to cover any claims if you are deemed at fault. The same applies if you’re in the process of reinstating your insurance policy or haven’t yet begun the process. 

Most insurance carriers will still cover your claim if you get into an accident during a grace period. However, it’s best to bring your policy current as soon as you can to avoid any circumstances where coverage may not apply. If you don’t have insurance coverage and the accident is your fault, you could be on the hook for thousands of dollars in medical bills and property damage. 

State laws dictate how car insurance companies can handle nonpayment. Some states, including Virginia, allow auto insurance carriers to cancel your policy even if you’re one day late. However, most insurers give you notice—30 days on average—to bring your account current before the carrier cancels the policy. 

If this is the first time you’ve missed your car payment, chances are the consequences won’t be as severe as if you were a repeat offender. For instance, most insurance carriers charge a late fee for missed payments if you don’t pay within the allotted grace period. You may also have to pay a reinstatement fee if your payment is excessively past due (over a week from the end of the grace period) or if there is a coverage lapse and the auto insurance carrier institutes a new policy. 

Additional consequences include losing your driver’s license, suspension of your registration tags and license plate, higher insurance premiums when you obtain coverage again as a high-risk driver, impounding of your vehicle, and even jail time. Many of these consequences occur if you drive without current car insurance coverage and get pulled over, depending on local and state laws. While it may seem excessive to lose your license and go to jail over missing a single car insurance payment, you’re putting yourself and other drivers at unnecessary risk. 

Part of learning how the borrowing process works can often include education about what to do if or when you miss a payment. Here are a few reasons why you might have missed your payment and what you can do to fix it. 

You simply forgot

Forgetting to do something is human, especially with busy schedules and long to-do lists. If you forgot to pay, speak to your insurance carrier immediately. Express your apologies and ask if any grace periods still apply. Make payment as soon as possible to reinstate coverage or ask about the next steps if that’s not an option. 

The payment was too expensive 

If you’re struggling to add your car insurance premium to your monthly budget, ask a representative about discounts, a reduction in coverage, or increasing your deductible limits. You can also comparison shop and ask about payment options. Most car insurance carriers allow you to pay in monthly installments or simply pay your bill in full with a lump sum. 

You no longer need car insurance

Neglecting your car insurance payment because you no longer need car insurance isn’t the best way to handle the situation. Instead, call your carrier and discuss your options. How you handle a lack of insurance coverage can dictate how easy it is to obtain coverage later on if you have the need. 

If you still find yourself struggling with missed car insurance payments, here are a few ideas to help you get back on track:

• Create a reminder on your phone 
• Set up automatic payments (you may even qualify for a discount) 
• Comparison shop before selecting coverage
• Sign up for paperless billing 
• Adjust your monthly budget accordingly 
• Build up an emergency fund
• Pay your bill in full instead of in monthly installments

One way to influence your car insurance premiums is to consider the car you’re driving. If you’ve asked yourself if you need a truck and didn’t consider insurance costs, you may be paying more than you had initially budgeted for. If downsizing your ride can help lower your premium, it might be worth trading in your truck for a sedan or electric vehicle instead.