Why You Should Never Let Your Insurance Lapse

Whether it's home insurance, business insurance, or any other insurance, letting your insurance lapse is a headache that's not easy to remedy, especially these days.

Life happens. The car breaks down, the kids get sick, an appliance fails. When the insurance bill arrives, you have every intention of paying it, but somehow you forget. The next thing you know, a cancellation notice arrives. You plan on delivering the payment in person to your insurance professional, but yet again, Murphy’s law intervenes and daily life gets in the way.

Coverage lapse

A few weeks later, you’re involved in an auto accident. When you call your insurance professional, you’re told a notice was sent before coverage was canceled. You have no insurance and the policy can’t be reinstated to cover the loss.

Unlike a missed cellphone payment, with auto insurance, there is typically no grace period or a very short window.? This depends on the provider.? Either way, your policy will expire at 12:01 a.m. following if you miss the payment.

While there may be some insurance companies that allow their customers to delay payments by a few days, you should contact your insurance professional before a delayed payment happens to see if this option is available to you.

If your vehicle is financed and there is a lapse in coverage, a lender may purchase an insurance policy to cover the vehicle and bill you for it. If the insurance premium remains unpaid, your lender may repossess the vehicle.

Reinstating a policy

Reinstating an insurance policy isn't like reinstating your cable TV, with a flip of a switch.?

An insurance company may be willing to reinstate your policy if you didn’t experience a loss during the lapse. However, during the current 'hard market' insurance carriers are tightening up on guidelines.? Therefore, even if you don't have a loss, there are no guarantees.? Whether it be auto insurance, home insurance, umbrella insurance, and even business insurance, if your policy lapses for non-payment, reinstatement may not be an option.? A lapse in insurance can also cause you to be uninsurable elswhere.? Your insurance history will reflect this cancellation for non-payment, which could result in declinations with other insurance companies.??

Even if your insurance company can issue a new policy starting the next day, you will still show a lapse in coverage. And any losses that happened during that time will not be covered. There may also be a fee associated with reinstating your policy. In addition, your insurance company may raise your premiums on the newly issued policy.

Your insurance company will backdate your coverage only when you have signed a document stating you’ve had no losses during the coverage lapse. Backdating is particularly important in auto insurance policies because many states require drivers to maintain continuous insurance coverage. A coverage lapse could result in a penalty by state and the potential for license and registration suspension.? In addition, most states assess fees for reinstating driver's licenses and registrations.

The short of of it is, under no circumstances should you let your insurance coverage lapse.? This will only result in a web of problems that will be very difficult to resolve and cause you a headache that could have been avoided.

How to Avoid a Lapse In Coverage

Typically, missed premium payments are handled the same way in all lines of insurance. However, most insurance companies offer several different payment plan options for your convenience.? Avoid the headaches by considering options like an annual payment.? This not only miminizes remembering to make frequent payments; it also helps to provide an overall annual savings on your premium.? If this is not an option for you, EFT (Electronic Funds Transfer) is also a popular method that helps to avoid forgetfulness.? ??

If you’re concerned about potentially missing an auto insurance payment and would like to discuss the payment options available to you, contact your insurance professional and begin the discussion sooner rather than later – before that ball gets dropped – to avoid any negative repercussions.

Salvatore D'Angelo, AAI - Insurance Agent, V.F. McNeil Insurance

+1 (203) 481-2684 | +1 (203) 868-4979

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