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: Oct 15, 2021

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Whether it is because you were out of town, got busy and forgot, or didn’t have the money in the account yet, many people find that they are late making their car insurance payment. If you pay the bill just a few days late, it might fall within the grace period, if you have one. After that, there will be a late fee.

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While a one-time late fee might not sound so bad, that’s not the worst thing that could happen if you are late paying your car insurance bill. You could lose your insurance and possibly be out a lot of money.

Late Fee

Some insurance companies have a grace period during which they give their customers a few extra days to pay their bills. How long this is will vary from state to state and company to company. If the company receives your payment during this time, you won’t have to pay a late fee, and you’ll see no interruptions in coverage.

However, if you make a habit of paying your bills late, even if they fall within the grace period, you might find that the grace period will disappear. Then you’ll be hit with late fees if you send in the payment late.

A car insurance grace period is the amount of time your insurance provider or state laws allow you to either delay paying for car insurance premiums without any lapse in coverage.

For example, you might have a difficult month or forget to pay your premium. Will the insurance company cancel your coverage if you fail to pay on time?

Sometimes people send in payments late because of when the bill falls due compared with when their paycheck arrives. For instance, if you are paid on the first of the month and the bill is due on the second, you might not have enough time to get the bill sent in. If this is your circumstance, you can do one of a couple of things.

You can call the insurance company and explain your situation.

Your insurer may be willing to move your due date so that you can meet it. Alternatively, you can use one of the payment methods discussed below to keep your payment from being late.

In some cases, your auto insurance provider is allowed to cancel your insurance plan after one day of non-payment and let your insurance lapse. You may pay a fee to reinstate your coverage immediately.

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Cancellation or Non-Renewal

If you are constantly late making your payments, or fail to pay one or more at all, you could be facing far more serious consequences than a late fee. You could find yourself without insurance.

Car insurance is like a contract.

Your insurer agrees to cover you if you agree to pay the premium. If you fail to pay, they can and will cancel your auto insurance policy. If the insurance company cancels your policy, they have to send you official notification a certain number of days before it happens. The number of days notice varies by state. You can check your state’s department of insurance for the requirement in your area.

If you have your policy cancelled, it will make it harder and more expensive to find another auto insurance policy. According to the Insurance Information Institute, there are only three reasons an insurance company can cancel your policy:

  • Non-payment of premiums
  • Fraud on the application
  • Suspension of driver’s license

Some states require car insurance companies to provide a written cancellation letter before doing so. You should the state laws on car insurance policies, grace period and cancellation regulations.

Not all companies offer grace period, yet many still offer it to remain competitive, so it’s important to talk to your auto insurance agent about all the details.

Then another insurance company looks at your history and sees a cancelation of policy, which immediately lets them know that you are going to be a high risk to them. So they will either not agree to cover you at all, or will charge you higher rates.

However, if you are just chronically late, but haven’t missed any premium payments, you probably won’t have this happen. But you could see an increase, sometimes a dramatic one, in your premiums at renewal time.

You might even find yourself getting a non-renewal notice.

A non-renewal is not the same as a cancelation of service. It just means that your insurance company won’t agree to cover you once your present policy expires. The Insurance Information Institute explains that this will not necessarily impact your rates with another company the way a cancellation will.

Credit Score

Any time you make a late payment on your mortgage, car loan, utilities, doctor’s office, or credit card it may be reported to the three credit agencies that keep track of your credit score. Late payments will bring down your credit score.

This is a double hit for your insurance costs. Not only will they see that you’ve been late making payments to them, but since it brings down your credit score, that will also make you rates rise at renewal time, or if you go to a different company

Did you realize that insurance companies use your credit history as one of the factors to determine the cost of your auto insurance? According to the Federal Trade Commission, studies have shown that those who handle money responsibly are also responsible behind the wheel.

So if your credit scores suffer, you’ll pay more for car insurance. Conversely, if you are habitually late making car insurance payments, your credit scores will suffer. This will make many more things more expensive, like a car loan or a mortgage.

For more information about how insurance companies determine your premiums, read Insure U’s article about buying auto insurance.

What’s the worst-case scenario?

Of course, the most severe consequence of missing a payment altogether is cancellation of service. If you keep driving without finding new insurance or don’t pay attention to the cancellation notice you’ve been sent, you could be facing legal and financial problems.

If you are caught driving without insurance coverage, you could have your license suspended and/or your car impounded, depending on the laws where you live.

Even worse, if you are at-fault in an accident while you don’t have insurance, you could be facing both of these plus a lawsuit from the driver that you hit.

Each state has financial responsibility laws that you must follow. So if you don’t have insurance to pay for the damages, you could find yourself in court being sued for them. If you don’t have the money to pay for them, you could lose your retirement savings, your car, or even you home, which would be sold to pay for the damages.

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How to find new insurance?

If you’ve had a non-renewal notice, you’ll need to start looking around for a new policy. Since it was just a non-renewal, you can get quotes from any insurance company just as you normally would.

Using a third party search engine to search for car insurance quotes can be very helpful!

However, if you’ve had a cancellation notice, you may find that many standard insurance companies don’t want to cover you. This can be frustrating since you need the insurance to drive. If you fall into this category, you do have a couple of options.

First, some auto insurance companies cater to high-risk clients. These companies will cover people who have had a DUI, multiple accidents, or a cancelation of policy. You should be able to find these auto insurance companies on the Internet.

Second, each state has made a provision for residents who can’t get insurance through traditional companies. This is called assigned risk coverage. It is more expensive than regular insurance, often as much as double, but it can be cheaper than high-risk insurers.

For a list of assigned risk insurers in your state, go to this link to the National Association of Insurance Commissioner’s website. Then click on your state on the map, and it will take you to the Department of Insurance in your state. There you can look for insurance for those who can’t find it elsewhere.

How to keep from making a late payment?

Modern technology has made it much easier to pay your bill on time. Here are some methods you can use to insure that you are never late making a payment on your auto insurance premium.

Go to the insurance company’s website. They will have a tab or a button, which will take you a page where you can pay the bill online. This will post on the day you make the payment. You’ll need a debit or credit card, or a check to get routing information from.

Alternately, you can call the insurance company to see if you can make the payment over the phone. Again, you’ll just need a debit or credit card handy or a check so they can get your account information.

If your bank has a bill pay feature on its website, you can set up automatic payments to go to your insurance company on the same day each month. This is nice because, once automatic payments are set up you don’t have to think about paying that bill each month.

If you really want to relieve yourself of the responsibility of having to pay the bill, see if the insurance company will automatically withdraw the payment each month from your checking account. Not only will you never have to worry about making a late payment, but some auto insurance companies will even give you a discount if you do this.

Paying any bill late can cost you more than just a late fee. You could be paying more in insurance for a long time if you pay your insurance premium late on a consistent basis.

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