What happens if you don't pay your car insurance premium for your vehicle?

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Written by
Insurance and Finance Writer
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Reviewed by
Farmers CSR for 4 Years
UPDATED: 2022-07-27T06:10:38.392Z
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A red toy car with a calculator and red pencil sitting on top of money for a car insurance premium.

Your car insurance premium may be one of your most expensive bills that you have to pay. However, your car insurance premium should always be prioritized because the consequences of not paying your insurance bills can be severe.

If you’re wondering what might happen if you don’t pay your car insurance premium, here’s what you should know.

Does your car insurance policy have a grace period?

Policies can vary for a number of reasons, even on payment terms. State insurance laws govern much of what an insurance policy can and cannot offer. Insurance companies have different offerings and even your driving record might be a factor in whether or not your insurance company has a what is known as a grace period for payments.

A grace period is a fixed timeframe after your payment due date in which you can be late on a car insurance premium payment and not be penalized by getting dropped by your carrier. A grace period is typically a few days to a week, or even up to 30 days. Not all insurance companies offer a grace period so be sure to check your policy.

Even if your carrier does offer a grace period on payment, there may be a fee to use it. There might also be a limit on the number of times that you will be granted a grace period. Over time, paying late fees will add up, adding significant additional cost to your overall premium cost.

Also be sure to pay close attention to any exceptions that might be listed regarding the grace period, such your annual renewal month being ineligible for a grace period payment.

If, after reviewing your policy, you learn that your carrier does offer a grace period, keep it in the back of your mind for when there’s a real emergency.

If you don’t pay your car insurance premium, your policy will lapse

If your carrier doesn’t offer a grace period, or if you’ve exhausted the grace period and still have not paid your premium, your car insurance policy will lapse. This means that you’ll be driving your car without insurance, and in almost every state, that’s illegal.

If you have a lapse in your car insurance policy, you’ll be required to find a new policy. Lapses in coverage often negatively affects your car insurance rates, meaning you will have to pay a higher rate when you buy a new policy. Car insurance companies see you as a higher risk after a lapse so you may have a more difficult time finding a policy or it could be much more expensive.

If you fail to purchase a new policy, but continue to drive your car without insurance, you could face serious consequences. The penalties for driving without insurance vary by state and can be severe.

In some states, if you are caught driving without insurance coverage, you might be subject to fines, further compounding your financial problems. Some states will suspend your driver’s license if you are caught driving without insurance. Without being able to drive, how will you get to work and drive to necessary meetings or appointments?

If you get into an accident, even a minor one, when your policy has lapsed, you’ll be responsible for paying for all of the damage to your car, and any damage to other vehicles in the accident too. If anyone’s injured, you’ll be on the hook for any medical bills.

You could be sued by anyone injured in the accident, resulting in enormous bills and there is the potential you could lose everything. Some states will even jail drivers who are uninsured and get into an accident.

Accidents can happen at any time, but even if you aren’t involved in a car accident, there’s a chance you could be found to be driving without insurance if you don’t pay your car insurance premium.

As part of the legal requirement that all drivers carry vehicle insurance, many states have electronic notification systems set up that mandate your insurance company to notify them of any accounts that have lapsed. This means that if you get pulled over for speeding, the officer will likely be able to tell that you don’t have an active car insurance policy and you could face the consequences of driving without car insurance.

Other consequences of non-payment to consider

Beyond the risk of having your license suspended for not having a valid auto insurance policy, there are other consequences of not paying your car insurance premium.

If you are making payments on a vehicle, the vehicle doesn’t belong to you, it belongs to the company that holds the lien on the vehicle. That’s why it’s a lender requirement that you carry liability, comprehensive, and collision coverage.

Due to the risk that the lienholder faces if someone doesn’t pay their car insurance, some car loans carry provisions in them that if a car buyer’s vehicle insurance policy lapses, “forced place” insurance (sometimes also called “creditor-placed” insurance, or “lender-placed” insurance) kicks in.

This is collateral insurance that is then added to the cost of your vehicle loan, increasing your car payments. As a last resort-type policy, these are going to be expensive policies provided by high-risk insurers, so the amount that will be added to your car loan will be significant. This is not a substitute for carrying your own insurance, it’s a backup to protect the lienholder.

Not paying your car insurance premium also will hurt your credit rating, making it harder to secure loans in the future, and increasing the interest rate that you will pay on future loans.

All in all, the penalties and expenses you will incur if you do not pay your car insurance premium are steep and are not worth the risks associated with non-payment of your monthly premium.

If you’re having trouble making payments due to the timing of your bills, talk to your insurer to see if you can adjust the due date for your premium payments. Also, if you think that you are paying too much for car insurance, shop around to see if you can get a better rate. Get multiple quotes to compare and find the best and cheapest car insurance in your zip code. Visit Clearsurance’s car insurance rankings page where you can find car insurance company prices from some of the companies that consumers say are the best in your zip code.

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