What happens if you don t pay insurance premium

Although it's a situation that nobody wants to consider, there may come a time when you aren't able to pay your car insurance premium. The best thing you can do if this happens is

What happens if you don t pay insurance premium

Although it's a situation that nobody wants to consider, there may come a time when you aren't able to pay your car insurance premium. The best thing you can do if this happens is to inform yourself of the consequences and implement steps to rectify the situation. Here's what happens if you don't pay your car insurance and the remedial steps you can take to minimize the negative effects of possibly having your coverage lapse.

What Are Car Insurance Premiums?

Car insurance premiums are the monthly installments you pay towards your car insurance policy. The insurer will determine your rate according to a few key considerations. These include:

  • Your driving history
  • Your age
  • Where you live
  • The type of car you drive
  • How often you drive your car

There are multiple ways that you can pay your insurance premiums. Payment options normally include monthly debit order, paying with cash at the insurance company's office, or mailing a monthly check. Depending on your carrier, you may also be able to make payments online or through a mobile application. Many carriers offer discounted rates for clients who pay their annual premium at once as opposed to paying monthly. If you're able to do so, you can save some money.

What Can Happen If You Miss Payments?

If for some reason, you stop paying your monthly premiums, you should be aware of the possible consequences. These include:

1. You'll Receive a Reminder

When you skip a payment, the first step that an insurance company will likely take is to send you a reminder to pay the bill. You'll most likely receive this reminder, whether via mail or a text message, a few days after you have missed the payment. Some insurers may add a small fee for late payment. If it's possible, you should settle up at this stage.

2. You Won't Be Covered

PolicyGenius states that even if you miss one payment, you may not be covered for any damages incurred while your account is in arrears. This means that if you're involved in an accident or incur any damages to your car when you've missed a payment or payments, you'll have to pay for everything out of your pocket.

According to Debt.org, there's an added risk to not being covered if you get pulled over by the police. Depending on the state, you may legally be required to have minimum coverage for bodily injury and property damage liability. In some states, you may also need uninsured/underinsured coverage. Drivers whose insurance doesn't meet state requirements may incur heavy fines and penalties. To avoid this, learn about your state's insurance requirements and prevent your coverage from lapsing due to nonpayment.

3. Your Premium Could Increase

Insuramatch warns that even if you miss one payment, your insurance carrier may cancel your insurance coverage. When you apply for a new policy, you will probably have to pay more due to the lapse in coverage. The reason for this, according to ValuePenguin, is that when you apply for a policy at a new insurance company, it will inquire about your insurance history and will know if you missed payments. Because of this, they will likely view you as a risk and may either not want to insure you or could drastically increase your premiums. This means that missing even just one payment could negatively affect your future insurance costs.

4. A Collection Agency May Get Involved

There's always the chance that an insurance company may hand you over to a collection agency. Apart from the fact that a collection agency will constantly nag you to pay, PolicyGenius warns that having a debt in collections could negatively affect your credit score, which, in turn, could make it difficult for you to:

  • Buy or rent a home
  • Buy or lease a vehicle
  • Acquire a loan
  • Apply for credit cards
  • Make investments

5. You Could Lose Your Car

If you're leasing a vehicle or have acquired a loan to finance a vehicle purchase, the lender probably requires some form of insurance, such as collision and comprehensive coverage. If you default on your insurance payments and lose your coverage, a lender is legally entitled to take back your vehicle.

Is There a Grace Period Before Losing Coverage?

An insurer would likely not immediately cancel a policy over a missed payment. It would typically provide a grace period of between 10 and 20 days before doing so. If the insurance company decides to revoke your policy, you'll receive a notice to inform you of the cancelation. Debt.org states that in the event that your policy is terminated, your insurer may be prepared to reinstate it once you have cleared all outstanding payments.

What To Do When You Have a Lapsed Policy

If you have lost coverage due to nonpayment, you shouldn't drive your car until you are insured again. So it's crucial to get your coverage reinstated as soon as possible. If only a few days have passed since your policy has been canceled, phone your insurer to discuss a payment plan and ask if they would be willing to reinstate your policy. However, if you have been without insurance for a long period of time, you may have difficulties in finding a company that will cover you, or you may end up paying steep premiums.

To get the best possible rate, Brightway suggests that you talk to your new insurer and explain why your previous coverage lapsed. You could also shop around at various insurance companies to see what they offer. Remember to ask about any possible discounts you may qualify for when doing so. Once you have gained coverage again, you can ask your insurer to recalculate your rates after six to 12 months have passed during which you paid your premiums and didn't make a claim.






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