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One of the biggest mistakes you can make when it comes to insurance is letting your policy lapse without knowing it. This prevents you from getting benefits that may have covered your losses, and leaves you unprotected in the event of an accident or natural disaster.
This insurance lapse guide will help you understand why and how your insurance can lapse, so you’ll know what to look out for, what steps to take if you suspect that has happened, and how to prevent future lapses from happening again in the future.
What is an insurance lapse?
An insurance lapse occurs when a driver remains without auto insurance after their insurance coverage has lapsed or been canceled. Insurance companies typically specify how much time the driver must remain insured before they can apply for new coverage.
However, not all states require drivers to maintain minimum amounts of insurance, so the required amount of time could vary in different states.
Many people don't realize that they're in an auto insurance lapse until something happens to their car.
Why Is My Car Insurance Cancelled?
Typically, your car insurance is cancelled because you haven't been paying the bill. The auto insurance company will send a letter or email letting you know that they are cancelling your policy due to non-payment. If you're experiencing financial difficulties and need help getting back on track with your payments, contact the insurer as soon as possible to discuss payment options.
You may also be able to set up an installment plan with them if this has not already been done. If you miss this window of opportunity and don't take action quickly enough, then it's too late for reinstatement of coverage.
How Can I Tell If My Car Insurer Is Suspicious?
One of the first indications that your insurance company might be suspicious is if they have recently called you to ask you to produce an updated proof of insurance. If this has happened more than once, then it's a definite sign.
You may also get an email notification that your policy is inactive, at which point you'll need to contact your insurer for confirmation that the issue has been resolved.
You can also give them a call and see what the current status of your policy is.
What Happens If My Insurer Thinks I’m Not Driving?
If your insurer thinks you're not driving at all, then they might cancel your policy. If this happens, you'll need to prove that you are in fact still driving.
For the next 3 months (or however long it takes for them to notice), your insurer will expect you to continue proving that you’re still a driver and maintain a clean driving record.
How Do I Rebuild My No Claims Discount (NCD)?
Do you have an insurance lapse? The most important thing to do is to shop around and find the best car insurance policy for your needs.
If this means changing insurers, you will need to allow a new NCD to build up again before it lapses again. You might not be eligible for an NCD refund if you switch insurers and are in a contract.
What Happens If I Drive Without Car Insurance?
If you're involved in an accident and don't have insurance, the individual who was injured or their attorney may sue for exemplary damages. This means that the court can order you to pay more than just the other person's medical bills and car repairs.
You could end up paying punitive damages, which is punishment intended to punish a wrongdoer. It would also be possible for someone without insurance to be ordered to pay a victim’s lost wages or legal fees associated with the case.
Should I Pay My Finance Company To Leave Me Alone?
You'll get an IRS letter if your insurer doesn't send them a letter of credit every year. Depending on the type of insurance policy you have, if it lapses for more than 12 months, it can be hard to reinstate coverage.
With no protection for sudden loss of income and increased risk for bankruptcy, life can become more expensive and stressful if you do not have protection in place.
Who Can Help Me Get Back On Track With My Insurance?
A lapsed insurance policy is generally one that has expired, been cancelled, or inactivated. It could also refer to any period of time when an insured person does not have a policy because he or she did not renew it. A lapse in coverage can create gaps in security and put your assets at risk.
There are some things you can do to help get back on track with your insurance coverage such as making a new purchase or signing up for monthly payments.
Final Words Of Advice From Miles Brignall...
An insurance lapse is where a person's insurance coverage lapses for whatever reason, usually because they've not been paying premiums or their policy has come to an end.
This can leave the person without protection, particularly if they have a pre-existing condition that may lead to increased health care costs.