A car insurance grace period allows drivers to keep their coverage even if they miss a payment. This grace period takes effect if you don't pay your car insurance premium on time, whether due to a medical issue, loss of employment, or oversight.
By Idalia Garcia Updated: May 20, 2021 Save Article AleksandarNakic | Getty ImagesWhat happens to your auto insurance policy if you fail to pay next month's premium? Does your insurer cancel your policy immediately or charge you a late fee? You'll most likely avoid either of these penalties because of the grace period for car insurance.
Although it varies by provider and state, most auto insurance companies offer a grace period of three to 30 days. During this time, you won't risk losing your insurance because you can't afford to pay. However, if you're leasing a brand-new car, you'll need proof of valid insurance before driving it home.
Regardless of the situation, it's wise to stay up to date with your insurance payments to avoid lapses. Still curious to learn more about car insurance grace periods? Take a look at how they work and how to prevent them to avoid legal penalties.
Did you buy a new car and need insurance? Get a free quote from different providers below.
A car insurance grace period depends on the situation. For example, if you purchase a new car, you may have a grace period that allows you to drive it before insuring it. However, this depends on your insurer and where you buy the vehicle from. Most dealers require proof of an active insurance policy before you drive the car off the lot. Also, depending on your state, it may be illegal to drive without car insurance.
If you already have insurance, your policy is up for renewal, or you haven't paid yet, you might enter a grace period. You can avoid penalty fees or policy termination for a specified amount of time during this period. That timeframe depends on who your provider is and where you live. Double-check your state's and insurer's requirements before driving a vehicle without insurance.
Some auto insurance carriers offer a grace period. If they do, state laws require them to inform you about it. Discover more about grace periods and how the rules differ by provider and where you live.
You'll likely enter a grace period for missing a premium payment or waiting to insure a new vehicle. If you forgot to renew your car insurance policy, a grace period could save you from losing coverage. Unfortunately, not every insurer offers the same grace period. Some may only offer you three to five days before canceling your policy or charging you a fee.
Insurance providers like Allstate offer a rollover grace period where they add your missed payment and a late fee to the following month's bill. You might be in luck if your provider offers a 30-day grace period so you have more time to pay. But if your current policy is too expensive, it may be time to find new insurance.
State laws require insurance providers to give you notice before canceling your policy because of a missed payment. Typically, providers deliver this notice by letter or email. The amount of notice differs by insurers, with some only offering a three-day notice.
Make sure you review your insurance policy to understand the rules of grace periods. Your insurance provider might provide a grace period of between 20 and 30 days. If you wait to pay your insurance after the due date, you risk paying a late fee or, worse, losing your policy.
The stipulations of a new car insurance grace period vary by state. For example, California allows drivers a 30-day window after purchasing a car to buy insurance. This grace period could extend to 45 days if you have an existing auto policy and you're waiting to add the new car.
However, this allowance only applies to registering a new vehicle. Driving without auto insurance coverage is illegal in most states, including California. Getting a new policy to insure your car as soon as possible is ideal. Prompt action will help protect your vehicle and prevent you from paying unnecessary fees.
Depending on your auto insurance policy, a grace period may automatically come into effect. Additionally, your state might not require you to insure a new vehicle immediately. The following situations are typical circumstances for a car insurance grace period.
Let's say you just purchased a used car. You want to upgrade a few things on the vehicle and are not ready to register it just yet. Eventually, you'll need proof of insurance to register it.
Check with your local Department of Motor Vehicles to understand how many days it allows you to have an unregistered vehicle. Use this DMV grace period to gauge when you must submit a first-time car insurance payment. Once you insure the vehicle, you must register it before the grace period ends.
Auto insurance term lengths can range from monthly to every six months or yearly. Depending on your purchase option, a grace period may be in effect when it's time for a policy renewal. Car insurance companies have a legal requirement to notify you of possible policy cancelation due to nonpayment.
For example, if you purchased a six-month car insurance plan in January, you'll receive a renewal notice from your provider sometime in July. This notice will include your last date of coverage so you know how long you have to make a payment. Be sure to pay the renewal fee, which is typically just the next month's premium payment. If you fail to pay, you risk your provider charging you a late fee or terminating your policy.
While you can purchase a car without having insurance, leasing is different. If you plan to lease a new or used vehicle, the leasing company will require you to have valid auto insurance. This means your car insurance coverage must be active to drive the car off the lot. If you enter a policy renewal grace period for the insurance on the leased car, you must pay it to comply with the lender's requirements.
With so many monthly subscriptions and bills, it's easy to forget to pay your auto insurance premium. A car insurance grace period can give you peace of mind if you miss a payment. Still, there are ways to avoid entering a grace period. Consider the following options to prevent making missed payments a bad habit.
The best way to avoid a grace period is to understand important dates related to your insurance policy. These dates include your monthly premium and renewal due dates. Your policy will also thoroughly explain how grace periods work if your insurer offers them, including when your provider will contact you and how long the grace period lasts.
Do you still have questions about your policy? Contact your insurance agent for more details on what they expect from you.
Ask your car insurance provider about available payment plans. You may be eligible for automatic payments from your bank account on a set date every month. Autopay is an excellent way to avoid missing payments. Some providers even offer a discount for clients who sign up for autopay. Discuss your payment options with your insurance agent to determine which suits your financial situation best.
Legally, your insurer must notify you when your policy is about to renew. You'll receive a letter or email listing your payment options. Mark your calendar or set reminders on the calendar app on your smartphone for policy renewal due dates. Avoid paying late fees or losing your insurance by paying on time.
What do you do if the grace period ends and you miss your payment? Call your insurance agent immediately to check your insurance status. They may not have terminated it yet. Some providers are forgiving in this process and may waive a late fee, especially if it's your first offense.
If your car insurance grace period ended but you want to stick with your insurer, you could have them reinstate your policy. The worst-case scenario is that you'll have a remaining balance on what was due to be paid before reinstating your auto policy. Your provider may also charge a reinstatement fee. If they cannot reinstate your policy, you'll need to shop around for a new insurance provider.
A grace period offers protection by keeping your policy active until you pay during the specified time. Unfortunately, your insurance will lapse if you fail to pay. Lapsed car insurance means your car is not covered by insurance. There are obvious consequences, such as paying out of pocket for car repairs if you get in an accident. But what about legal consequences?
In most states, it's illegal to drive a car without insurance coverage. If you do this, you risk suspension of your driver's license. A license suspension means you cannot legally drive for a temporary period. This suspension also adds negative points to your driving record. A driver's license suspension can result in higher premium rates from insurance providers because you're a high-risk driver.
Depending on where you live, you'll need to file an SR-22 or FR-44 form. This form is a certificate of financial responsibility that your insurance carrier files with your DMV to prove you have the state's minimum insurance coverage. The bad news is that not many providers are willing to file this form for you since you're a liability. If this is the case, you'll need to find a nonstandard insurance company like The General.
Suppose you lease your vehicle and your auto insurance lapsed. A lapse in car insurance means the vehicle is not covered. Most lenders require you to carry comprehensive and collision coverage. Without adequate insurance, the leasing company reserves the right to repossess your car.
Did you enter a grace period because you're having trouble paying for your car insurance? Or do you need new insurance because the grace period ended? Consider the following ways to save money on your insurance premium.
Insurance providers offer discounts for military members or students. Safe drivers with clean driving records are often also eligible for a discount. Do you only use your car to commute to school? You may be eligible for a low mileage discount on car insurance. Homeowners can bundle home and auto insurance for extra savings, depending on their provider.
You could remove coverages from your insurance policy if you need to cut costs because of your current financial situation. For example, you can remove optional coverages such as roadside assistance or rental car reimbursement if you don't think they're necessary. However, your state may require you to carry a minimum insurance coverage. Typically, this is a liability coverage of a specific limit per person per accident.
Consult with your local DMV for further information on your state's requirements. At the very least, you could opt for a minimum coverage policy to lower your monthly expenses, but this option is not ideal. If you get in a major car accident, you'll have to pay out of pocket for damages or medical expenses.
The higher your deductible, the lower your insurance premium costs. This option is an easy way to reduce your monthly payments. However, consider making this a temporary solution. If you get in an accident, your insurer expects you to pay the deductible before offering any compensation or reimbursement. If your deductible is too high, you may be stuck without a car if you can't pay to repair it.
Car insurance grace periods are common. Most auto insurance providers offer them to provide a cushion between monthly or policy renewal payments. Although you can expect a grace period, the length varies by provider. Your state requires your insurer to give you notice about the grace period, but the time you have to pay what's due can be as short as three days. Avoid a car insurance lapse by setting due date reminders and making payments on time.
Insurance EditorIdalia Garcia is a licensed insurance agent with extensive knowledge of various insurance lines. She has more than 12 years of experience in auto insurance and 10 years in property insurance.