According to the Consumer Guide for Auto Insurance published by the New Jersey Department of Banking and Insurance (DOBI), there is not grace period for auto insurance policies that have lapsed or terminated. Under current regulations, companies must provide notice of payment due dates according to what type of payment is due.
Renewal offers must be mailed 30 days prior to the due date. A cancellation notice for nonpayment of premium must be mailed at least 15 days prior to the expiration of the policy. If you do not pay your renewal premium or the premium due amount on a notice of cancellation by the date specified, the company is not required to once again tell you the coverage has lapsed, nor to offer to reinstate your policy. While insurance laws require that an insurer must be able to provide proof that a notification was mailed to the address where you have told them you reside, they are not required to mail any notice "certified" or "return receipt" and are under no obligation to ensure that these notices are received.
If you do not pay your insurance premium, the company will cancel your policy. Getting a policy from another insurer may be difficult or may cost more if you let your policy lapse and go without insurance. A lapse exceeding 30 days could place you in the assigned risk market.
Whether or not a policy is terminated for a late payment depends on what type of payment is due. Most companies will allow policyholders to make installment payments on their premiums and may even accept these payments received after the initial due date. This is permissible because a policy is already in force and there may be equity (premiums already paid) available to continue coverage for a short time. However, if no payment is received, the company will issue a notice of cancellation for nonpayment of premium. If this payment is not received before the due date, the policy will terminate.
Until the initial payment for a policy renewal is paid, there is no policy in force. Therefore, when the renewal payment is not received by the due date, the previous policy expires and the offered policy does not become effective. Should the policyholder wish to continue coverage with that company, the company would then need to write a new policy for that customer.
A policyholder who mails a renewal payment before the due date cannot lose coverage if the payment is received within three business days of the due date or there is evidence it is postmarked prior to the due date. However, insurers can charge the driver a late fee if the payment arrives after the due date.