It does not matter what state you live in — you are required to maintain sufficient auto insurance. Failure to abide by this rule opens the door to all sorts of legal consequences, but it can also be troublesome when you attempt to secure another auto policy. Learn how a lapse in coverage affects the auto insurance quote process.
Before you can understand the penalties of a lapse in coverage, it is important to understand what a lapse is and is not. Insurance companies typically give drivers a grace period to resolve potential issues, so if you missed a payment a couple of days ago, your policy will not be immediately canceled. A lapse occurs when a payment has not been made for an extended period or the driver has failed to resolve any other issue with the policy in a reasonable amount of time.
A major part of the formula for deciding how much a person pays for insurance is their risk level. The higher the risk, the costlier the coverage. Drivers that allow their coverage to lapse are considered high risk, and often get insurance quotes that resemble this increased threat. For drivers who have repeatedly lapsed their policies, some companies may even decline to extend coverage. Being a high-risk driver never pays when it comes to auto insurance coverage.
If the lapse in coverage is directly related to a failure to pay, the insurance company has a legal right to send the unpaid bill to a collection agency that will in turn put a negative mark on your credit. Insurance companies typically also analyze a driver's credit history to determine their rate during the quote process. Any negative mark on your credit will lower your score, which can, in turn, cause your auto insurance to increase.
States can penalize drivers who fail to maintain coverage by enforcing that these drivers carry an enhancement known as an SR-22. The SR-22 is not additional coverage, but instead, a filing that must be attached to your policy so that the state can always verify your coverage is active. If the policy lapses, the state is notified immediately. Insurance companies charge extra for this filing, so it is something best avoided.
The best way to avoid these issues and avoid paying too much for auto coverage is to ensure you keep your policy in good status. Talk to an insurance agent to learn more about how auto insurance quotes work.