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Lapses in Coverage

Compulsory auto insurance laws require drivers in virtually every state to carry continuous auto insurance. While most states set this requirement, the coverage limits and options that are required in each individual state can vary dramatically. State officials who set and oversee compliance of mandatory auto insurance laws believe that requiring auto insurance protects consumers and innocent drivers on the road. Unfortunately, just like drivers violate the laws of the road, many violate mandatory auto insurance laws. These lapses in coverage not only put your driving privilege at risk, they could potentially affect your auto insurance rate.

What Happens to My Driver License if I Have a Lapse in Insurance Coverage?

Believe it or not, the status of your auto insurance policy is reported to the Department of Motor Vehicles on a regular basis. If you cancel your coverage, the policy is not renewed, or the policy lapses for non-payment, your insurance company will notify the DMV and the DMV will then take action. Failing to carry auto insurance can lead to the suspension of your registration. If you have failed to carry insurance in the past, you may even have to file an SR-22 with the Department of Motor Vehicles for 3 years. Reinstating your registration and filing SR-22s will cost extra money in addition to the premiums you must pay for state minimum auto insurance coverage.

Will My Insurance Rate Go Up Because of a Lapse in Auto Insurance Coverage?

Auto insurance underwriters are trained to spot risk. When a driver has a moving violation, they are considered a higher risk than a driver with a clean driving record. If a company notices that you have had a lapse in coverage, you could be classified as an irresponsible driver. This means that you are a high risk policyholder, and in exchange for coverage you may need to pay higher premiums. Lapses in coverage can affect your rates even when you have no tickets or accidents on your driving history. Some companies are not even willing to cover any applicants who have reported a lapse in prior coverage.

How Will the Company Know You Have Had a Lapse in Coverage?

Insurance companies use a number of different electronic systems to verify the information provided on an auto insurance application. You should always be honest on your application because you risk being denied for coverage for giving intentional false statements. If the application does not ask whether or not you had a lapse in coverage, there is a chance that the company automatically runs your credit report to see if cancellations have been reported. Some companies even go as far as requesting a Letter of Experience from your prior insurance company to verify when your coverage ended. Honesty is the best policy.

What Action to Take if Your Coverage Has Lapsed

If you are currently driving without auto insurance, you should bind coverage immediately before you operate your vehicle again. The longer the period you choose to drive without coverage, the higher your rates can go. You also put yourself at risk each and every time you get behind the wheel without insurance.

Auto insurance is a law that you should comply with. In most cases, it is cheaper to carry state minimums than it is to drive uninsured. Avoid being considered an irresponsible and high-risk driver, and purchase an insurance policy that you can afford.

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