What Is a Car Insurance Grace Period?

How Does a Car Insurance Grace Period Work?

Many insurance companies have rules that allow you to maintain coverage even if your payment doesn't arrive by its due date. The time between when your payment is due and when your policy lapses is known as the grace period. During this time, your coverage remains in effect even if the insurance company hasn't received your payment. Grace periods vary by insurer and state (not all states require insurers to offer grace periods) but generally range from 10 to 20 days.

If your insurer offers a grace period and you catch up on your payments before it ends, you typically won't experience any serious consequences. Instead, you'll maintain continuous coverage as if you paid on time. However, if you don't catch up on your payments before the grace period ends, your coverage could lapse, leaving you uninsured.

How Does a Grace Period Work When Buying a New Car?

If you have an existing auto insurance policy and buy a new car, you typically need to add the new car to your policy within a certain number of days—usually seven to 30, depending on the insurer and state where you live. If you have an accident during this timeframe (even if you haven't officially added your new vehicle to the policy yet), the insurance company will usually cover you.

However, if you don't have an active insurance policy at the time of purchase, you must get one before driving the car home. Otherwise you'll be driving uninsured. If you purchase a car from a dealer, they typically require you to show proof of insurance before you drive off the lot.

Learn more >> What Happens if You Drive Without Insurance?

Consequences of Missing a Car Insurance Payment

Even if you don't get behind the wheel before reinstating your car insurance policy or purchasing new coverage, it could still cost you. Here's how.

• Reinstatement fee: If your insurance company is willing to reinstate your policy, they may charge a fee to do so.
• Rate increase: If you've had a lapse in coverage, your insurer may charge you more for the same coverage.
• Policy non-renewal: Your insurance company isn't required to renew your coverage if you miss a payment. However, they must notify you in writing before canceling your policy.
• New coverage: If your current insurer doesn't agree to cover you after missing a payment, you'll need to find an insurance company that will. Insurers may view you as high risk and charge more after a car insurance lapse. Plus, you won't be eligible for a continuous coverage car insurance discount—if the insurer offers one.
• Repossession: Lenders typically require drivers who finance the purchase of their vehicle to maintain collision and comprehensive coverage until they repay their loan. If you're still paying off your auto loan and no longer have insurance, your lender may be able to repossess your vehicle.

Consequences of Driving Without Insurance

If your coverage lapses and you drive anyway, you may face serious penalties since nearly every state requires drivers to maintain insurance to drive legally. Consequences for driving without insurance vary by state and may include:

• Out-of-pocket expenses: If you're at fault in an accident, you'll be responsible for paying for damages or injuries out of pocket. Repair costs vary based on the type of car you drive, where you live and the extent of the damage. Generally, repair costs may range from $500 to $1,500 for minor damage; $1,500 to $4,000 for moderate damage and $6,000 or more for severe damage. Without liability coverage to protect you, you could also be responsible for legal fees and settlement costs if someone files a lawsuit against you after an accident.
• Fines: Some states charge fines for driving without insurance. Amounts vary significantly by state. For example, drivers caught driving without insurance in Missouri pay $20 for a first offense, $200 for a second and $400 for third and subsequent offenses. Fees for driving uninsured in Louisiana range from $500 to $1,000, and Delaware charges $1,500 for a first offense and $3,000 for additional offenses.
• License and registration suspension: If you're caught driving without insurance, the authorities may suspend your license and/or registration until you can prove you have coverage.
• SR-22: You may need to have your insurance company file an SR-22 form on your behalf to prove that you have the minimum amount of car insurance your state requires. You'll have to pay a filing fee, which varies by state but usually ranges from $25 to $50. Additionally, SR-22 filing requirements typically increase the cost of a policy.
• Vehicle impoundment: Some states impound the vehicles of drivers who are caught driving without insurance.
• Points: Your state may add points to your license for driving uninsured. Having points on your record typically causes insurance rates to rise.
• Jail: In some states, you could serve jail time for driving without insurance.

How to Get Insurance After a Lapse in Coverage

If you don't make your payment before the grace period ends and your policy lapses, you need to take steps right away to reinstate it or get a new policy. Start by calling your insurer and asking if they would be willing to reinstate your existing policy. If they are, you'll need to make a payment right away, but you'll maintain continuous coverage.

If not, you'll need to shop around for a new policy. You may pay more for coverage after a lapse, but you need car insurance to drive legally in almost every state. If you struggle to find coverage, consider checking with companies that specialize in insuring high-risk drivers. If you're unable to get a policy through a private insurer, you may need to check with your state's insurance pool to secure coverage.

Learn more >> How Much Car Insurance Do I Need?

How to Avoid Missing Car Insurance Payments and a Lapse in Coverage

Here are some tips to help ensure you make your payments on time.

• Set up autopay. When you enable automatic bill payments, you won't have to remember to pay your bill, and your insurer may give you a discount for signing up. Just be sure your bank account has enough money to cover your insurance bill when it's due. Otherwise, you could get hit with overdraft fees.
• Set reminders. Set calendar alerts reminding you when your payment is due so you don't forget.
• Build an emergency fund. Having a financial cushion helps protect your financial health in all kinds of scenarios. Although an emergency fund is typically used for unexpected expenses, it can help cover insurance costs if your bill is due and you're short on cash.
• Update your address. It's easy to forget to make your car insurance payment if you don't receive a bill. If you move, update your address with the insurance company so you receive future invoices and other correspondence.
• Create a budget. Making a budget helps ensure you have enough money to pay your important bills, such as car insurance. Be sure to include all your expenses. If you don't make monthly car insurance payments, set aside money each month to cover the bill when it's due.
• Minimize insurance costs. If your payments are stretching your budget, it may be worth reevaluating your coverage. Eliminating certain types of coverage and reducing policy limits can help you save. But it can also leave you vulnerable if you're in an accident. It's important to strike a balance between affordability and financial protection when determining how much car insurance you need.
• Talk to your insurer. If you know you won't be able to make a payment, let your insurance company know right away. They may be willing to work with you to help you get caught up.

The Bottom Line

A car insurance grace period can buy you time if you forget or cannot make your payment by the due date. But it's important to catch up quickly: A lapse in coverage may result in higher premiums and other undesirable consequences. Experian's auto insurance comparison tool can help you find adequate coverage by allowing you to compare more than 30 top insurance providers in one place.