A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Sep 24, 2021

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In times of economic crisis, bill due dates seem to come one after the other, and a car insurance premium is no different. In this day and age of tight finances, it is all too common for drivers to rely on grace periods for car insurance renewal premiums.

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A grace period can act like a crutch, so it is crucial not rely on it too much. You need to organize your finances so that you are able to make your car insurance payments and premium renewal payments without fail. You put yourself and your family at risk when you don’t have car insurance coverage. Insured drivers are safe drivers!

However, you also want to ensure that you’re not just skating by with the minimum coverage required of you; fitting everything into a budget isn’t the easiest but it will help you stay out of financial straits. Especially if you have a newer vehicle, you’ll want add-on coverage, and your provider may even make it a requirement. But paying for something like comprehensive coverage that protects your beautiful new ride can get pricy, so knowing there’s a grace period can provide peace of mind. Just don’t get too attached to using it.

What is the definition of a grace period?

According to the definition supplied by the III (Insurance Information Institute), a grace period is a specified number of days that an insurer provides after the due date of a renewal premium that the customer has to pay the premium without facing penalties.

If your auto insurance premium is not paid by the due date, a grace period allows you a few more days in which to get the payment in without being dropped by your auto insurance provider.

If you do not pay your renewal premium by the due date or within any possible grace period, then your car insurance provider will cancel your policy. Generally, this includes the deactivation of your online accounts and your customer policy number. Insurance lapses can cause a serious problem if you end up getting caught that can lead to a penalty such as license suspension.

Your insurance carrier generally provides this grace period so that if you make a late payment, you still have time to make up for missing the due date. However, the goal is to offer it as a last resort, rather than a permanent crutch. Plus, it’s never usually more than a few days; a 30-day grace period would be extremely generous, and would run the risk of having someone pay double payments each month if they fall too far behind.

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What is the purpose of a grace period?

Car insurance companies understand that customers can get busy and lose track of time. A grace period allows customers to have a small, extra period of time in which to get their premiums paid.

Many people who find themselves living paycheck-to-paycheck may need to rely on a grace period in order to have the money to pay a premium. While most auto insurance companies allow premium payments to be broken up and spaced out over the life of the policy, such as months or six months, the first payment of a renewed policy period is likely to be larger than the rest.

Auto insurance providers will usually mail a renewal packet a week or two prior to the renewal date. Many also send out email reminders as well if a driver has signed up for correspondence via email. If it comes down to it, and hopefully it doesn’t, they will also send out a cancellation notice should you fail to pay within the grace period.

Where can you find your grace period?

According to the National Association of Insurance Commissioners’ consumer guide to auto coverage, most auto insurance companies do not offer a grace period for a renewal payment for coverage. This is because they do not want to extend insurance coverage to a driver who has not paid for it.

However, if your car insurance provider does offer a grace period, it will more than likely be on the declarations page or at another point in your insurance policy.

You should always read over every bit of your auto insurance policy. This is true whether it is your first time with the insurer or if you have been with them for years.

Generally, those car insurance providers that do have a grace period only have one for a short period of time. It is entirely up to the auto insurance company, but many will mail a notice of cancellation to you as a courtesy. However, make sure that you are not relying on a grace period to see you through.

Are there any dangers of a grace period?

Not everyone can be financially stable enough to commit to automatic payments, which is why grace periods exist. While a grace period may give a driver more time to pay to renew his or her auto insurance coverage, there are some dangers of relying on a grace period. First and foremost, a driver isn’t really covered during the time between when the premium is due and when it is actually paid, which means there is going to be a coverage lapse.

If a driver should have an accident or suffer a loss during a grace period, then the costs of the injuries and damages to the vehicle, yourself, or other driver might not be covered by the auto insurance company at all. This puts drivers at great risk when they are not actually covered by an auto insurance policy.

Furthermore, a car insurance provider may have changed their grace period policy, and a driver may be out of luck when they go to pay. Then, it appears that the driver has had a lapse in coverage.

A lapse in coverage can cause a driver’s premium to soar as most car insurance providers view it as a risk factor. Other auto insurance companies will charge you higher rates for coverage; even your car insurance provider may charge higher rates to renew the policy. Each late payment runs the risk of ruining the rate you pay for your auto policy.

Another option is to call your insurance provider’s customer service center. Ask if they have a grace period, how long it is and what will happen if you don’t pay on time. It is always a good idea to know as much information as possible.

You also will want to ask if they have late payment fees. The grace period won’t help if you’re paying more, especially if you’re only a day overdue. Sometimes you may even discover that your provider will take a partial payment, which won’t result in any sort of late payment fees or a lapse in your coverage, but that depends on the company. Ask every question you can think of so you’re not left in the dark or with a monthly premium that has skyrocketed.

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What should you do if you miss a premium payment?

If you miss your premium due date, the first thing you should do is contact your auto insurance provider. According to the OIC (Oklahoma Insurance Department), there may be times when an insurer will reinstate your policy after you have paid your late premium, but there are no guarantees. There may be some minimum requirements you have to fulfill in order to be reinstated.

Some people may have a one-time grace period exemption, or they may have to start your policy from scratch. However, you generally will not be covered during the lapse.

Either way, your first priority is to get car insurance coverage to protect the value of your vehicle, your livelihood, and your safety. It is also important to understand that most auto insurance providers are required by state law to report a driver who has no coverage. If you are pulled over while driving without insurance, it is likely that you will be arrested, fined and your vehicle will be towed to an impound lot. By making your payments on time, you’re practicing safe driving habits; driving with coverage is as safe as it gets.

Are there ways in which you can avoid needing a grace period?

While many people need to rely on a grace period to be able to have the money to pay the premium to renew a car insurance policy, it is not a sound financial move and could actually lead to bigger financial hardship down the road. There are a few tricks that consumers can use to ensure that their car insurance policy is always current.

First, many car insurance providers allow customers to choose a billing date. There are usually a variety of choices, such as the beginning of the month, the 15th of every month and the last day of the month. This allows those who might be paid monthly or have a lot of other bills due at certain times of the month to choose the payment due date that works the best for them.

For instance, if a family has a mortgage bill and car payment due at the first of the month, then the middle of the month or the end of the month might be a better time to make a car insurance payment. A vehicle owner who is paid only once a month on the last day of the month might prefer a due date at the first of the month to ensure they have the money to pay the car insurance bill.

Another option that many car insurance providers utilize is automatic billing. The charges for the car insurance costs are taken out of an account on the same day every month. This is a good option for those who just forget that the bill is due.

It is not a great option, however, for those who cannot be assured that the funds will be in the bank account when the bill is due. Many auto insurance companies view this as the same as writing a bad check and many impose penalties for doing so. Those fees can then be added onto overdraft charges or insufficient funds charges from your bank.

If you are having trouble meeting your car insurance premium, then perhaps it is time to adjust your coverage to reduce your premium.

Discussing your options with an agent is always a good idea. You may also be able to cut other expenses out of your budget to help pay for your car insurance premiums. Few monthly expenses are as important as your car insurance bill. Whatever it takes, you don’t want to rely on any extended grace period if you’re struggling to pay your bills.

Another option, provided by the Kansas Department, is to pay your car insurance premium well in advance. Perhaps there are two bills that you can switch payments for.

For instance, you can make sure that you pay your car insurance renewal premium prior to paying your cell phone bill. While it will certainly be inconvenient to go without your cell phone for a day or two, it is not nearly as dangerous as going without car insurance coverage. Your first priority is to protect yourself financially.

Another option is to search for a similar coverage type with another provider. Remember, you want to do this before your current coverage has lapsed, or you will be paying higher rates.

Utilizing quote comparison sites is a quick and easy way to find out what different pricing options are available to you. There is also no obligation if you don’t find a new quote to tempt you into switching car insurance carriers.

Start your search for more affordable car insurance right away by inserting your ZIP code into the FREE finder box right away!