Ask Anna: My Auto Insurance Policy was Cancelled For Non-Payment!

urgent Today, I recieved this message from a member:

During the holidays some of my mail was misplaced and I didn’t realize my car insurance bill was missing, so I didn’t pay it. Today I found the notice that if my bill wasn’t paid by January 6th my auto insurance would be cancelled.

I have a couple of questions, first of all does this mean that I have been driving around for 2-days without any car Insurance?

And, since it’s January 8th two days after the cancellation date will I be able to get my car insurance renewed?

I had no idea that my insurance could cancel so quickly without a second letter or something letting me know. I have a loan and I also wonder if my loan company will be contacted?

Ask Anna

Having your cancelled auto insurance policy reinstated will depend on the guidelines your Auto insurance company has set. If you have never had a lapse or cancellation due to premium payments most companies will allow reinstatement.

If you pay for the full policy period in one or two payments for the 6-month renewal (or annual renewal) you should already be in the habit of paying a large premium, and with the larger payment and explanation your insurance company may have no problem reinstating your policy.

If you pay monthly premium payments, some insurance companies may decide to reinstate your policy but, may not offer you the convenience of a monthly payment plan. Also if you make monthly payments you will likely need to pay a deposit payment of one month, plus the first month payment.

If your auto insurance is “reinstated” then you should only have been without insurance for the 2-days since the coverage cancelled. Your auto insurance may request that you sign something stating that during the lapse you didn’t have insurance and no claims will be paid for the two days you were without coverage.

Most auto insurance carriers will reinstate a policy cancelled due to non-payment, as long as the lapse in coverage is under 30 days, and there are no losses or claims. Some auto insurance carriers have grace periods for reinstatement of your policy. Generally, a 30-day notice of cancellation for non-payment is all that is required for non-payment, as Insurance is one of those things we pay for in advance. Policy holders with monthly payment agreements may have as long as 60-days due to the up-front payment made when the policy is first started.

Be sure to contact your insurance company or agent and don’t just mail a payment. Depending on the rules for your insurance company and your state’s laws, many “reinstatements” are not technically considered a lapse of coverage.

You loan company (lien holder) only cares about the Comprehensive and Collision coverage and depending on any notices they may have received the typical reaction is to slap a high cost comprehensive and collision policy on to your loan. Usually, a phone call to your finance company will get the other policy removed from your loan. In a short time such as 2-days, they will likely wait to see if you have purchased a different policy, or reinstate the one you have.

If you have lost your car insurance due to non-payment and your insurance company is not willing to reinstate the policy or wants to re-rate as higher risk and higher cost, don’t wait around start shopping for your new auto insurance policy quickly. Lapses and cancellations for non-payment can make your Insurance Credit Score lower and cause problems in getting a new policy with another company. Speed is of the essence here!

One last word, on this subject is to make sure your payment is recorded and time stamped if possible before you drive again!

Photo credit for this blog entry: sxc (no use restrictions for this photo)

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