What Happens if I Don’t Pay My Insurance Premium?

Quick Answer

Failing to pay your insurance premium could cause your policy to lapse, leaving you without coverage. Here’s what happens if you don’t pay your insurance premium, along with ways to potentially save on insurance costs.

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Paying your insurance premium keeps your plan active. It may be a regular monthly bill or something you pay periodically throughout the year. Costs vary depending on the type of insurance, your level of coverage and your insurer.

According to a 2021 Federal Reserve survey, almost a quarter of U.S. adults said they had—or were close to having—difficulty paying their monthly bills. Failing to pay your insurance premium could cause your policy to lapse, leaving you without coverage.

There are proactive steps you can take if you're having trouble affording your premium payments. Here's what happens if you don't pay your insurance premium, along with ways to potentially save on insurance costs.

What Happens if You Don't Pay Your Insurance Premium?

If you're behind on your insurance premium, your outstanding balance could be sent to collections. That delinquent account will likely be reported on your credit report and drag down your credit score. It will stay on your credit report for seven years (some scoring models will not factor paid collection accounts into your score, however). There are other potential consequences of not paying your premiums.

Health Insurance

If you don't have health insurance through your employer or are looking for coverage that better suits your needs, you can purchase a plan yourself through your state's health insurance marketplace. In 2020, the average annual premium for marketplace-purchased plans was $5,472 for individuals and $13,824 for families, according to eHealth data. Health insurance plans through the marketplace have a 90-day grace period, though it may vary if you don't qualify for a premium tax credit. You can check your state's insurance department for details.

If you don't make good on your premium payment, you could face the following:

  • Your health insurer will likely terminate your coverage. If so, you will have to wait until the next open enrollment period to sign up for a new plan.
  • If you receive covered medical care during the grace period and are later dropped from your insurance plan, you could be retroactively billed for those services.

Home Insurance

Most mortgage lenders require borrowers to carry homeowners insurance. Standard plans typically offer liability coverage and protect the structure of your home, your personal belongings and additional living expenses if you're involved in an insured event. Your premium will depend on your level of coverage, deductible and other factors—but costs are rising faster than inflation. Premiums jumped over 11% from 2017 to 2020, according to the Insurance Information Institute. The average annual premium in 2021 was $1,398.

Many homeowners have their insurance premium rolled into their monthly mortgage payment. The lender holds those funds in an escrow account and pays their insurer on their behalf. If your lender allows, you might choose to pay your premiums yourself. Your bill may be due annually, semi-annually, quarterly or monthly.

Here are some things to keep in mind if you miss a payment:

  • Your coverage will lapse if you don't pay within the grace period, which is usually no more than 30 days past your due date.
  • If you fail to secure coverage, your lender may purchase a policy on your behalf and add the cost to your mortgage debt. Chances are this will be more expensive than your previous plan. If you don't repay these costs, you could default on your mortgage—and foreclosure could follow.

Auto Insurance

Every state has its own minimum car insurance requirements. Beyond that, you may choose to add or increase certain types of coverage, which will increase your premium. Those who lease a car will likely face higher insurance costs as well. The average car insurance premium in 2021 was about $1,950, according to insurance marketplace Gabi®, a part of Experian.

When it comes to paying your premium, you might opt for monthly or semi-annual payments. It's worth noting that some car insurance companies offer a discount if you pay in full.

If you leave your premium unpaid, the following consequences could follow:

  • Your insurer will eventually drop you. The grace period for car insurance is typically 10 to 20 days but varies from state to state.
  • Driving your car without insurance could mean violating your state's laws. In California, for example, your vehicle registration will be suspended. You might be hit with fines and have your driver's license suspended too.
  • If your auto loan lender requires a certain level of insurance, they could repossess your vehicle.
  • Your premium could increase when you eventually seek new coverage.

What to Do if You Can't Afford Your Insurance Premium

  1. Contact your insurance company and clarify your grace period.
  2. Shop around for a more affordable insurance policy without letting your current plan lapse.
  3. Explore your financial options, like tweaking your budget so you can afford your premium payment going forward. That may mean reducing your expenses, selling unused items or increasing your income.

How to Save Money on Insurance

  • If you're enrolled in a marketplace health insurance plan, see if you qualify for premium tax credits.
  • Consider increasing your deductible. A higher deductible means your insurer will pay less if you file a claim. This, in turn, can lower your premium.
  • Modify your coverage to a level that feels comfortable for your lifestyle and budget.
  • Bundle your home and auto insurance. According to a recent Insurance.com analysis, the average annual savings is 15%.
  • See if your insurer offers discounts, like lower rates for safe drivers, students, veterans and more.

The Bottom Line

It's important to keep up with your insurance premiums. If you don't, your coverage may lapse—which could negatively affect other parts of your financial life. Finding ways to reduce your premiums can free up space in your budget. That's where your credit score comes in. A higher score may translate to lower insurance rates. Experian can help you get there. Check your credit score and credit report for free whenever you need it.

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