Carrying auto insurance is a requirement in most states. Unfortunately, it is not unusual to miss out on monthly insurance payments or drive uninsured, particularly if you are in a tight spot financially.
Failure to pay your car insurance can quickly become an expensive mistake, especially if you get into an accident. So it’s essential to understand the ramifications of a lapsed policy and what you can do to remedy the situation:
Six Things That Might Happen if You Stop Paying for Your Car Insurance
- Expect a Reminder
Your insurer will send you a reminder if you’re late on your payment. This usually happens a few days after the payment deadline has lapsed. As much as the insurer will allow you to clear your arrears, you’re likely to incur a small fee for late payment.
When served with a reminder, you should try to clear any outstanding arrears as quickly as possible. If you, however, choose to avoid this reminder, there will be grave consequences on your part.
- Reach Out to Your Car Insurance Provider
If your insurer serves you with a cancellation notice, you should contact them immediately to inquire if there is any possible way you can prevent a lapse in your coverage.
Reaching out to your insurer will present an opportunity to negotiate a reinstatement, especially if your policy cancellation is a few days old. As with many car insurance providers, you might be offered a payment option, but only if you provide concrete reasons why you have failed to make payments.
- Cancellation of Your Current Policy
According to auto insurance statistics, most insurers terminate policies the moment a policyholder stops paying insurance premiums. After all, insurance companies are in the business of making money and reserve the right to cancel a policy because of non-payment.
With your policy canceled, the insurance contract is considered null and void. However, the insurance company should reach out to you before canceling your policy.
- Your Credit Score Will Be Severely Affected
The moment you forfeit to pay your car insurance premiums, there’s a likelihood that your credit score will take a hit. Insurance companies are obligated to share clients’ payment transactions with credit reporting agencies that collect credit information and compute credit scores.
That means any missed payment will lower your score, making it difficult for you to access other services such as getting a loan, mortgage, or credit card.
- Your Car Loses Insurance Coverage
When your policy lapses, it is pretty obvious that your car is no longer insured. Assuming that you get into an accident, the insurer is not obligated to help out financially. In other words, you’ll be forced to dig deeper into your pockets to pay for car repairs and other expenses.
If you can’t afford the repair cost, you probably face the prospect of going carless for days or even months. And as it’s often with the way of life, disaster strikes when you least expect it.
- You Face the Risk of Paying Higher Premiums
Skipping insurance payments can have costly consequences as you might have to pay more on your next policy. In addition, if, by any chance, you have a history of non-payment of insurance premiums, you run the risk of being classified as a high-risk client.
The reason for this is simple. Lenders abhor clients who can’t be relied upon to make full and timely payments. As a result, car insurance providers may slap you with a higher premium rate. Maintaining consistent payments is the most feasible way of keeping your premiums low.
Not paying for your car insurance might expose you to unnecessary risks, especially if you opt to drive an uninsured car. If anything, you should do everything possible to avoid missing a payment as this might set you on the path of ruining your personal finances.