It may not seem like a big deal, but forgetting to make an auto or home insurance payment or having a lapse in coverage can have serious repercussions.

Let’s say you don’t drive that much anymore, so you miss an insurance payment or two, but then you get into an accident… If your premium goes unpaid, your insurance policy is void. Meaning, your insurance company is not obligated to rewrite your policy. You’ll be left without coverage and will likely have a higher rate when you do find a new carrier because the lapse has now left you labeled as “high risk”.

Your cancel notice gives you the date that payment must be received by, and if that date occurs with no payment, the system will automatically cancel your policy. Once you’re canceled, your carrier will not take you back unless they are required by law.

Let’s dive further into more facts and answer some questions every vehicle or homeowner should know about their coverage.


Home insurance is required if you have a mortgage.

While home insurance isn’t required by law, your lender will require you to be insured if you have a mortgage. Your policy will need to cover wind, hail, fire, and vandalism. The lender will be named as an additional insured. Should you file a claim for damage or loss, the insurance company will issue a two-party check naming you as the insured along with the mortgage company.

If you fail to pay your home insurance, you could have a lapse in coverage. Your policy will cancel, which is a violation of your mortgage agreement, and there will be no coverage in the event of a loss or claim. Also, the homeowner’s insurance is a package, which covers the home, other structures, your personal property, additional living expenses, and provides personal liability. You will lose all of that if the policy cancels.


Car insurance is required by law.

In every state except New Hampshire, you’re required to have car insurance. You have to have minimum coverage in case you get in an accident, though what you are required to carry does vary by state.

When you register your car, you submit proof of insurance. When you buy a car, you can’t leave the lot without signing up for insurance. It’s just along the way that you might accidentally, or on purpose, miss a payment and cause your insurance to lapse.


What is a lapse?

You pay for a specific time period on your insurance. It may be six months, a year, or another timeframe. In all cases, you will have a start date and an end date. As long as you are paying the bills on time, all is well.

If, however, you miss a payment, your coverage lapses. A lapse in coverage can be as short as one day or it can be much longer. Like other bills that you may be late in paying, there may be a grace period and a late fee. Unlike other services, however, you might face more severe consequences including government-mandated ones, if the lapse goes too long.


What happens when you drive without insurance?

If your insurance premium goes unpaid for long enough, your insurer will cancel your policy. Insurance helps with the financial responsibility if you get into an accident. Because it is usually required by law, there are additional consequences if you don’t have it. Here’s a summary of what you can expect if you let your insurance lapse.

    • If you’re in an accident, you would be fully responsible for any damages or injuries.
    • Depending upon the state where you live, you may be limited in the amount that you can sue the at-fault driver.
    • Your insurance company may cancel your policy and alert the Division of Motor Vehicles.
    • Your license and registration may be revoked, and you would be responsible for paying daily fines to the Division of Motor Vehicles. You may also have to pay a fine to reinstate your license and registration.
    • Once you are reinsured, you may need to carry an SR-22 form with you for three years, showing proof that you have the minimum required insurance.
    • You may have difficulty getting insurance again, as you’re now considered a risk. If you do get insurance, your insurer can raise your rates. Drivers with a coverage lapse of 30 days or more saw an average premium increase of 35%.
    • Your car could be repossessed if it is leased or if you are paying a loan.
    • Your credit score may drop, which can affect your ability to get a loan or credit card. The lapse will remain on your credit report for up to 7 years.

What happens if your home insurance is canceled?

If you lapse in payments for your home insurance, and as a result, your policy is canceled, your mortgage lender will be informed in writing.

    • Your lender can force you into a more expensive policy, called forced-placed insurance. This insurance only covers the loan amount for the mortgage company. There is no coverage for your belongings or personal liability. Therefore, if the house costs more to rebuild than the remaining loan amount, it won’t be covered.
    • If you don’t agree to the insurance, your lender can send your loan into default. This presents a risk of losing your home to foreclosure.
    • Your credit score will drop as a result.
    • Without insurance, whether or not you have a mortgage, you are responsible for 100% of the costs for any damage to your home if something unexpected happens.


What should you do if you have a lapse in coverage?

    • Once you realize your policy has been canceled or you’ve missed a payment call your insurance company and see what can be done.
    • Find out if they are able to rewrite your policy. Pay whatever fines are needed. Many companies may charge extra or interest fees on the remaining balance but California Casualty only charges a small monthly fee.
    • If you cancel over a certain number of days, you will be looked at as a brand-new customer and have to meet all underwriting guidelines. You may lose certain discounts or benefits for customer loyalty.
    • If you’re unable to make your insurance payment, let your insurer know. They may be able to adjust the policy to lower your cost.
    • Your insurer may deny you coverage. In that case, you will need to shop around for a new policy. Be honest with the new company. They will be able to check to see if your coverage has lapsed in the past. Be prepared to pay a higher premium because of it.
    • After you get insurance again, contact your state’s Division of Motor Vehicles to update your insurance information. Make sure that your registration and license are still valid.
    • Similarly, update your mortgage lender if your home insurance has been affected.
    • If you’ve changed insurance companies, and you owe your old insurance company any money, make sure to pay it. They will likely pass it along to a debt collection agency if you do not.


How can you prevent a lapse?

The best way to avoid any lapse in coverage is to set up a system so you will pay your premium
on time.

    • Pay the premium in full if you are able to do so. Consider using your credit card for your annual insurance payment to get extra credit card award points. There is a cost savings and convenience of paying in full with most policies. At California Casualty, if the state allows, both auto and home policies offer this type of savings.
    • Set up automatic payments such as an EFT from your checking account or a payroll deduction, if offered or available.
    • Set a reminder on your phone or calendar for your premium due date.
    • Make sure you know the end date of your policy. From 30-60 days prior to the renewal, California Casualty sends out a renewal policy for the insured to review. Schedule a time with an agent to review your policy to see if you need any updates before the renewal takes place.
    • If you switch insurance companies, make sure to time the start date of your new policy with the end date of your old policy so there is no lapse.
    • Talk to your insurer about options if you are not driving for an extended period of time. For example, you may be deployed overseas. You still may want coverage since your car would remain at risk for damage due to weather or vandalism, and it could be stolen. However, you can suspend coverage for a time period, including while you are deployed or on sabbatical. This may not be an option if your car is leased or you’re paying off a loan.



This article is furnished by California Casualty, providing auto and home insurance to educators, law enforcement officers, firefighters, and nurses. Get a quote at 1.866.704.8614 or

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