Insurance Lapse – What it is and How it works

An insurance lapse refers to the termination or discontinuation of an insurance policy due to the policyholder’s failure to pay the required premiums within the set time frame. This failure to make timely payments can lead to a break in coverage, leaving the insured without the protective benefits and services outlined in the insurance policy.

Insurance Lapse - What it is and How it works

The primary cause of an insurance lapse is non-payment of premiums, which are the regular payments policyholders make to maintain their insurance coverage. These premiums contribute to the financial pool from which the insurance company draws to cover claims and provide services. When a policyholder misses one or more premium payments, the insurance company may initiate a lapse in the policy.

What Is Insurance Lapse?

An insurance lapse is a period where your policy has ended and you do not have insurance coverage anymore. It also means that you have no new coverage to replace your old policy.

Here are some of the reasons why your insurance can lapse:

  • You lose count of the beginning and end of your policies.
  • You missed your premium payment.
  • If your insurer terminates your policy for reasons like a high number of claims filed,
  • Your premium payment was not received by your due date.
  • When you do not renew your policy.

How Does it Work?

If you do not have enough money to pay for your premium or the cash value on your policy has been used up, your insurance policy will go into a forgiveness period. This means that your policy will lapse once your grace period has ended and your coverage has ended. So, if you file a claim or are involved in an incident, your policy will not cover you. Moreover, the death benefit will not be paid to the insured person unless you renew or get a new coverage plan.

When Does Coverage Lapse?

This type of phase can happen at any time, depending on your insurance policy. For instance, if you have auto insurance, your quote may lapse after you miss your payment. It is quite similar to different types of insurance quotes. Except your quote has a cash value, your policy will lapse after the cash value has been exhausted and nothing is left.

More importantly, insurance policies offer grace or forgiveness periods after you miss a payment to ensure that your quote does not get terminated immediately. During this period of grace, you can still hold on to the coverage offered by the policy. However, keep in mind that the grace period varies depending on state laws and the company.

What To Do When You Cannot Make a Car Insurance Payment

If, for some reason, you are not able to make your monthly payments for your insurance, you should first tell your insurer. This should also be done beforehand. So, if you are proactive, the insurer or insurance company will be more than happy to work with you.

Here are some other options you can consider before your car insurance gets canceled:

  • Reduce your coverage.
  • Increase your deductible.
  • Look around for a cheaper quote.
  • Ask for discounts.

Reduce your Coverage

If you cannot make a car insurance payment and your policy has comprehensive and collision coverage but you do not have a car loan that needs full coverage, drop these coverage types. This will help you reduce your premium.

Increase your Deductible

Increasing your deductibles will assist you in lowering the cost of your quote. However, make sure that you can pay for higher deductibles when you file a claim.

Look around for a Cheaper Quote

There are tons of car insurance companies that offer cheap and affordable quotes. You just have to make sure that you compare their rates first before choosing.

Ask for Discounts

While shopping or looking for an affordable policy or quote, you can request discounts you can qualify for.

Cheap Car Insurance Companies After a Lapse in Coverage

After you have a lapse in your coverage and would like to get another affordable quote, do not worry because I have got you covered. Here are some of the cheapest places to get and repurchase another car’s insurance:

  • Farmers.
  • Geico.
  • State Farm.
  • USAA.
  • Travelers.
  • Nationwide.
  • Progressive.
  • American Family.
  • Allstate.
  • Liberty Mutual.

Even though you might experience some premium increases after a lapse, you can still search for and apply for an affordable policy.