If you are unable to pay for your car insurance by the due date, then your policy will normally cancel on that day, and your car will be uninsured. In general, there is no type of grace period for car insurance policies, so if you do not pay on time, the policy terminates, and you are without coverage. Most car insurance companies will give you up to a month to make a payment.
In many states, if you have a lapse in auto insurance coverage, you can face penalties such as fines, fees, registration, and license suspension, to name a few. To avoid the penalties if you are unable to pay for car insurance and thus keep the state-required minimum coverage on the vehicle, you will need to turn in your license plates and registration. Since most states require insurance on the vehicle for the car to be registered if you turn in the plates and registration, they can’t penalize you for not having insurance.
Of course, this means you will have to find someplace to park your vehicle (most states do not allow an unregistered and uninsured vehicle to be parked on a public roadway) and find other means of transportation until you can afford to put insurance back on your vehicle. Your insurance may be higher once you can get it started again due to the lapse in coverage and previous cancellation due to non-payment on your record.
If you cannot afford your current car insurance premium, then shop around to see if you can get lower rates that will fit into your budget. If you need to keep Collision and Comprehensive coverages on your vehicle (a lien holder will normally require this if you still are paying on a loan or lease for your vehicle), you may be able lower your rates by choosing higher deductible amounts. Look for ways to save money on car insurance premiums instead of dropping insurance and continuing to drive and being penalized by the state for driving without insurance.
If you cancel insurance on a car that has a lien holder on it, then likely the bank or other financing institution will place forced insurance on your vehicle and add it to your car’s monthly payment. Forced Placed insurance is expensive and only covers the lien holder’s asset, the car, and does not provide you with liability insurance or other insurance requirements that your state has in place. So if you have a lien holder on the car, it will be cheaper in the long run if you can figure out a way to keep your own auto insurance on the vehicle at a much lower cost than what forced placed insurance will cost if the lien holder does it.
To get instant car insurance quotes and find a way to keep the insurance you can afford on your vehicle, click here.
— Michelle Megna contributed to this story.