What Is a Car Insurance Grace Period?

Quick Answer

A car insurance grace period allows you to keep your coverage if you miss a payment. But you only have a limited time to catch up before your coverage lapses.

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No one wants to pay their bills late. But maybe you forgot or couldn't make your payment by the due date. If you miss a car insurance payment, the insurer's grace period allows you to maintain coverage even though you haven't paid. But you'll need to catch up before too much time goes by, or your coverage could lapse, putting you and others at risk. Here's how it works.

How Does a Car Insurance Grace Period Work?

A grace period is a window of time after your car insurance payment is due when your coverage remains in place even though you haven't paid your bill. Grace periods vary by state law and insurer but generally range from 10 to 20 days. If you catch up on your payments before the grace period ends, there typically won't be any serious consequences. Your policy will remain in force as if you had paid on time.

Consequences of Missing a Car Insurance Payment

If you don't pay your insurance premium but catch up on payments before the end of the grace period, it's usually not a problem. But if you don't pay your bill before the grace period expires, your coverage could lapse. Reinstating it may not be so simple, and it could cost you. Here's how.

  • Reinstatement fee: If your insurance company is willing to reinstate your policy, they may charge a fee to do so.
  • Rate increase: If you've had a lapse in coverage, your insurer may charge you more for the same coverage.
  • Policy cancel lation: Your insurance company isn't required to maintain your coverage if you miss a payment. However, they must notify you in writing before they cancel your policy.
  • New coverage: If your current insurer doesn't agree to cover you, you'll need to find a new insurance company. Insurers may view you as high risk and charge you more after a coverage lapse. Plus, you won't be eligible for a continuous coverage car insurance discount—if the insurer offers one.
  • Repossession: Lenders typically require drivers who finance the purchase of their vehicle to maintain collision and comprehensive coverage until they repay their loan. If you no longer have auto insurance, your lender may be able to repossess your vehicle.

Since nearly every state requires drivers to maintain insurance to drive legally, you may also face serious penalties if you drive without coverage. Penalties for driving without insurance vary by state and may include:

  • Out-of-pocket expenses: If you're at fault in an accident, you'll need to pay for damage or injuries you cause out of pocket.
  • Fines: Some states require drivers to pay a fine for driving uninsured.
  • License and registration suspension: If you're caught driving without insurance, the authorities may suspend your license and/or registration until you can prove you have coverage.
  • SR-22: You may need to have your insurance company file an SR-22 form on your behalf to prove that you have the minimum amount of car insurance your state requires. SR-22 filing requirements typically increase the cost of a policy.
  • Vehicle impoundment: Some states may impound your vehicle if you're caught driving without insurance.
  • Points: Depending on where you live, your state may add points to your license for driving uninsured.

How to Avoid Missing Car Insurance Payments

Here are some tips to help ensure you make your payments on time.

  • Create a budget. Be sure to include all your expenses. If you don't pay your car insurance bill every month, make sure you set aside money each month to cover the bill when it's due.
  • Set reminders. Set calendar alerts reminding you when your payment is due so you don't miss it.
  • Set up autopay. When you enable automatic bill payments, you won't have to remember to pay your bill. Just be sure your account has enough money to cover your insurance bill when it's due. Otherwise, you could get hit with overdraft fees.
  • Build an emergency fund. Having a financial cushion helps protect your financial health in all kinds of scenarios. Although an emergency fund is typically used for unexpected expenses, it can help cover insurance costs if your bill is due and you're short on cash.
  • Minimize insurance costs. If you can't make your payments because you can't afford them, it may be worth reevaluating your coverage. Eliminating certain types of coverage and reducing policy limits can help you save. But it can also leave you vulnerable if you're in an accident. It's important to strike a balance between affordability and financial protection when determining how much car insurance you need.
  • Talk to your insurer. If you know you won't be able to make a payment, let your insurance company know right away. They may be willing to work with you to help you get caught up.

The Bottom Line

A car insurance grace period can buy you time if you forget or cannot make your payment by the due date. But it's important to catch up quickly, or you risk a lapse in coverage. Experian's auto insurance comparison tool can help you find adequate coverage at affordable rates.