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UPDATED: Mar 13, 2020
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Car insurance payment plans are a very convenient way for drivers to spread out policy premiums over a period of time but what happens if your car insurance payment is late? Can a car insurance company cancel your coverage, are you charged a late fee, is there a grace period? You may be surprised to know that being late on a car insurance policy payment can sometimes cause a lot of complication in your life.
In many states car insurance companies have the right to cancel your auto insurance coverage due to non-payment and have NO obligation to re-instate your coverage. Even one day late and you are technically in default which could lead to automatic termination of coverage and possibly even exposure to much higher premiums for a new policy.
What happened to a Grace Period?
Credit cards and loans have grace periods but car insurance certainly does not. While every state has different rules governing how or when an insurer can drop insurance coverage there should never be an automatic assumption that your auto insurance policy payments have a grace period attached.
Policy payments are also due BY the due date which means they must received at the insurance company by the due date… NOT postmarked by the due date. While most car insurance companies do not drop consumers for payments a few days late without some kind of final notice there are times when insurers want to clean up their customer base and make decisions to drop customers who are late. Such driver profiles could customers who show a consistent late pattern or simply higher risk drivers.
Canceled for Non-Payment … Rates may be higher!
If your policy is cancelled for non-payment then quite likely your choices for car insurance coverage will be much higher than before as auto insurers will always ask the question if you ever had a policy cancelled before. Regardless if your driving record is clean having a policy cancelled for non-payment is actually grounds for denial by many insurers. Some insurance companies may opt to insure you but might even restrict your policy payment options demanding the initial policy paid in full.
Some consumers opt to hide the truth from car insurance companies and while we have all heard stories where someone told a white lie and still got covered its never a good idea to lie on a car insurance application. If your policy was cancelled for non-payment then disclose that (if asked) and try to find an auto insurance provider who will work with you. The penalty will not stay with you forever and shortly you will earn back the preferred driver status you had prior to non-payment of policy premiums. If you are ever found to lie on an application for insurance it’s very possible the insurer will simply cancel your coverage and deny all or any outstanding claims.
Compare Car Insurance Companies
Having an auto insurance policy canceled is never any fun but it might also be an opportunity to compare other policy options in the marketplace and learn more about how car insurance works. Since your “preferred status” will be unlikely at many auto insurers from a recent cancellation due to non-payment then do the research and learn about car insurance discounts, what companies offer coverage and always start a car insurance comparison search online.
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