It’s common knowledge that New York State requires us to have Auto Insurance for our vehicles. Unfortunately, during the pandemic, many people lost their income and had to make some difficult decisions on which bills to pay.
For some, Auto Insurance was one of the bills that went unpaid which caused their policy to lapse. There are a number of unfortunate consequences of lapsing your Auto Insurance that many people did not realize. The three consequences and reasons not to lapse your auto insurance listed below are in no particular order.
Reasons Not To Lapse Your Auto Insurance
1. Fines and Penalties from the NYS DMV
The NYS Department of Motor Vehicles assesses a daily fine for each day a vehicle is registered but not insured. This fine is typically $8 per day. That means that a family with two vehicles who lapses their Auto Insurance for a month (30 days) would accrue a fine of $480!
Paying your insurance premium is almost always cheaper than paying the fine. Since the reason most people lapse their Auto Insurance is because they cannot pay their insurance bill, the fine usually causes a major financial issue for them.
If the NYS DMV assesses a fine that goes unpaid, they will suspend your drivers license. This adds another struggle for a variety of reasons including the fact that you’re not going to be able to drive to work to earn the money that you need to pay the fine and insurance.
2. Increased Future Insurance Costs
Many insurance companies will charge a higher premium to new policyholders who come to them with a lapse in their Auto Insurance. There are a number of reasons for this but the main reason is that profit margins are small for Auto Insurance and you usually need to be a customer for a few years before you’re profitable to an insurance company.
If you have a history of lapsing your policy, an insurance company will probably charge you more because there’s a higher likelihood that you’ll lapse again.
3. Risk of an Accident
If you lapse your Auto Insurance policy and continue to drive your vehicle, not only do you risk a hefty fine if you’re ticketed for operating an uninsured vehicle, you risk a major financial disaster if you have an accident.
If your vehicle is damaged, you might not have the money to repair it but its even scarier if you’re responsible for injuries to yourself or someone else. Medical bills can add up quickly and you could be sued if your responsible for property damage or injuries to someone else.
Avoiding an Insurance Lapse
If you’re in danger of lapsing your Auto Insurance, the best thing you can do is have a conversation with your insurance agent/broker. Many insurance companies have special payment options to help customers who are struggling to make their payments but you need to request these options before your policy lapses. Once your policy lapses, there’s usually not much an insurance company can do to reinstate your policy unless you pay your past due amount in full.
For more information about this or any other insurance topic, please contact us, visit our Clifton Park, NY office or call us at 518-877-7447.
John Lofrumento, CFP®, FSCP®, RICP®
President, The Lofrumento Agency
Clifton Park, NY / Ballston Lake, NY