Auto Insurance Lapsed: What Comes Next?
Recently, a friend was telling the story of how his girlfriend allowed her car insurance to lapse. She had moved to a new address and failed to notify her insurer, who sent a notice that her coverage was expiring on a certain date. Naturally, the company sent the notification to the old address and payment was never received. As luck would have it, she was in an accident before she could square things away and ended up having to pay more than $6,000 out-of-pocket.
She made the biggest mistake you can possibly make with auto insurance — she failed to take action and exploit her options while they were still available.
How could this situation have turned out differently? A few things:
First, she could have called the company or her insurance agent and asked for them to reinstate the policy.
This would have been her best possible option because given her history with the insurance company, she could have easily been reinstated had she taken care of the lapse within a week or two of it occurring. She was in good standing with her company. She’d had very few claims since sitting down behind the wheel while under the company’s coverage. She probably would have had to pay a reinstatement fee, but given the fact that the accident was her fault, that small fee would have been nowhere near the thousands of dollars she will now be out as a result of her own carelessness.
One other option: she could have asked a friend or family member to list her on their policy.
Again, the best results would have come had she done this soon after the policy lapsed rather than waiting until there was an accident and she was out of luck. Something else this option is good for is when you allow the coverage to lapse because you no longer own or have need of a vehicle. By still being on someone’s policy, you are viewed as less of a risk by insurers, and this is invaluable whenever the time comes to reinstate a policy in your own name.
Of course, the best thing she could have done was not allow the policy to expire in the first place, and these days, technology can be incredibly useful in ensuring that those milestone dates don’t go by without warning. In my own world, I prefer the Check app. Not only can you use the smartphone application to pay your bills, but also you can use it as a notification service that ensures you never again miss an important deadline. Usually, when I enter into a new financial obligation — home mortgage, car loan, etc. — I take a little time out of my day to set up an account online and connect it to the Check app. From there, Check bookmarks important dates according to the parameters I set. With just a little elbow grease on the front end, I never have to worry about remembering make-or-break deadlines because the app does it for me.
And this is not an endorsement for Check. There are any number of applications that keep track of pertinent dates and events so the above example never happens to you. Another such option is the Calendar app that comes pre-installed on your phone. Simply go back to the start date of your policy, and if it renews every six months, set a reminder a few days ahead of time to ensure that your policy is renewed before going into the delinquent stage.
Last but not least, an automatic bank draft on a certain day each month will also ensure that bills are always being paid, hence zero lapses in coverage.
There are some valid reasons to lapse your auto insurance coverage, but every year there are numerous policy lapses, and almost none of them are for those reasons. Don’t allow something as simple as a date to get away from you. Stay on top of your policy’s effective dates, and use whatever tools you can to keep your coverage going for as long as you need it.