How a Lapse in Car Insurance Increases Your Future Premium

Have you lost your car recently? Did you have to give it back to the bank because you lost your job, became temporarily disabled, or for some other unforeseen circumstance? If so, you probably cancelled your car insurance too. After all, why would you need car insurance if you no longer own a car?

Jump forward in time. You're back on your feet, life is good, and you're shopping for a new car. You've spotted your dream wheels, and you start to make some telephone calls to obtain some car insurance quotes. (By the way, it is always a good idea to get an insurance quote before purchasing any vehicle. You may be able to afford the car; however, you may not be able to afford the car insurance). You are endlessly interrogated by a little voice on the other end of the telephone line, asking every pertinent detail of your driving history as well as your life. You're a good driver, haven't had any accidents or tickets, and your credit score is okay. So far, so good. Finally, the little voice asks if you have ever had a lapse in car insurance. Shazam! You've now entered the twilight zone, as your car insurance quote ends up three to four times higher than you were paying before you lost your car and hence cancelled your car insurance!

What Just Happened?

Although it is true that car insurance premiums are based upon a number of factors, having a lapse in car insurance will absolutely kill your chances of getting an affordable rate. It doesn't matter who you call, major insurance companies or independent agents, they will all pretty much give you the same outrageous quote, raising your blood pressure and sending your head spinning.

Unfortunately, automobile insurance companies typically stereotype drivers who have had a lapse in car insurance into a high-risk category, even if the driver has a very good reason for having a lapse in insurance, such as not owning a car and therefore not needing car insurance. One of the main reasons they do this is because of insurance fraud.

Car Insurance Fraudsters

Next time you're sitting in a traffic jam or stopped at a red light (sitting on the bus, as you no longer have a vehicle to drive), look around at the fancy, expensive cars on the road and observe who is behind the wheel. Ask yourself how a good majority of these people are able to afford to drive these vehicles, especially considering our current state of negative economy. The answer is quite simple; they don't carry car insurance and drive illegally!

So, how did they manage to get that fancy car? First, they go to a car dealership or car lot and pick out a vehicle and purchase it. As it is illegal to drive a car off any lot without a car insurance binder, the person calls an insurance company, gets an auto quote (no matter what the price), and pays whatever the car insurance company demands. They then drive their shiny new car off the lot, but here's the catch...they never make another car insurance payment! They only make the first insurance payment, enabling them to drive the car off the lot, then they cancel their insurance and drive illegally. As a result, these car insurance fraudsters "lapse" in their insurance coverage, which costs car insurance companies millions of lost dollars each year. Thanks to these car insurance fraudsters, your own car insurance premiums will now skyrocket, even if you innocently have good reason for having a lapse in your own car insurance policy.

But Let Me Explain!

You now plead your case with the little voice on the telephone. You explain that you temporarily did not own a car and that you didn't need car insurance, and you certainly are not a car insurance fraudster. It does not matter. Automobile insurance companies will throw you under the bus and penalize you. To make matters worse, another known fact about car insurance companies is that they "assume" the longer you are without car insurance the worse your driving skills become, and thus consider you to be a higher risk on the road. Really?! They don't take into consideration how long you have been driving, how long you have had your driver license, or the fact that you still may be driving, just not driving or owning your own vehicle.

What To Do

Unfortunately, if you have run into a situation where you cancel your car insurance and have a lapse in insurance, there really is no way to get around paying a higher premium when it comes time to buy a new car and get new car insurance. Even keeping a non-owner's car insurance policy in force won't help, as these only cover you when you drive someone else's car, not your own, so insurance companies usually will not recognize this as having a continuing policy in force. The only exception where a lapse in insurance will usually be forgiven and a driver not penalized with a higher premium is if one is in the military service. Otherwise, if you want to drive legally and comply with most state insurance laws, you will have to pay a higher price for car insurance for at least six months, at which time most insurance companies will then lower your rate.