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Is there a grace period for my car insurance payments?

You are required by law to maintain auto insurance coverage, and in order to maintain your car insurance you may make your car insurance payments by the payment due date. Many consumers that are not familiar with their payment schedules and the state rules surrounding policy cancellations assume that their insurance company will simply cancel their policy at 12:01 am the day after the premiums due date. Some companies may do this, but in many states the carrier is actually required by law to notify you before a policy will terminate. Start comparing car insurance rates now by using our FREE tool below!

If you handle the bills in the household and you like to make your payments very close to the due date, it is important that you learn about insurance graces periods and how they work. If you have a missed payment, the grace period policy is actually what can save you from having a lapse that can raise your rates or lead to penalties. Read this guide and find out more about the common grace period in the car insurance industry, state laws about policy cancellations, and scenarios where no grace period will be enforced.

What is an insurance grace period?

The basic definition of a grace period is the amount of time that you will have to pay the amount that you have been billed before you will be in violation of your contract. Since drivers are required to pay their car insurance premiums to legally drive on public roadways, understanding the period of time that you have to finally make that payment is crucial.

When this term is used in the insurance industry, it represents the period of time that you have to submit your full payment before your insurance coverage officially lapses. If you do not pay within the allotted grace period, you will become an uninsured driver. Depending on a grace period can become dangerous, but knowing it exists when you overlook a payment or when you are tight on funds can be extremely helpful.

Do all insurance companies have a payment grace period?

You should never assume that your insurance provider offers a grace period before you put off making a payment. Some companies have a grace period because it is required in the state and some offer it as a convenience to their clients.

When it is not a state requirement, your best bet to ensure that you will have a grace period is to do business with a preferred insurance carrier.

Most high-risk carriers will have more strict payment policies. This is primarily because of the fact that the company is on the hook for covering claims during a period that has not yet been paid for. If the high-risk company does have a grace period, there is a good chance that it is very short or that there is a high late fee required when the payment is made.

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What are state laws surrounding cancellation for non-payment?

Every state sets their own laws regarding when a cancellation letter needs to be sent to a policyholder. The purpose of state laws on policy cancellations is to protect the consumer from losing their coverage because of an oversight. You should review the state law that governs the cancellation process so that you know that the company is complying with this law. A majority of states require that companies give a minimum amount of advanced notice when cancellation is set for various reasons. Here is a breakdown of common laws:

  • Cancellation for non-payment

If a policyholder fails to make a payment for their premiums, the state may require that a cancellation notice is sent out. This notice will typically go out the day following the due date. A majority of states will require that the notice allows the policyholder 10 days to remit payment to continue coverage.

  • Cancellation for other approved reasons

There are cases when a company has the right to cancel a policy in the middle of the term. This might include when a license is suspended, when someone files a fraudulent claim, or when the policyholder violates the contract. If this happens, most state regulations require the insurer to give the policyholder 30-day notice before the cancellation is effective.

What is the most common grace period?

Just because state law requires a grace period does not mean that this is the only period of time that you have to pay. Some companies that are dedicated to customer satisfaction will give their clients more time to make a late payment. When a grace period is offered, it can range between 3 and 30 days. It is not common to find a 30-day period, but it is believed that most insurers allow about a 14-day time period.

What happens when your policy lapses?

There are several consequences of driving uninsured, even if you did not intend to. Some of the consequences include:

  • Court assessed fines and fees
  • A misdemeanor conviction
  • Vehicle impoundment, storage and towing fees
  • License and plate suspensions and reinstatement fees
  • Increased car insurance premiums
  • Classification as high-risk driver
  • Requirement to file an SR-22

Is there a grace period for your renewal?

Grace periods do not apply to all payments. In most cases, the time period is only valid on premium payments or payment plan installments. If you pay monthly, quarterly, or semi-annually, you may be able to put your grace period to use. If, however, you pay in full and you are trying to exercise your right to a grace period, it is not going to work.

Grace periods do not apply to policy renewals. In order for a policy to renew, payment must be remitted. The only time a renewal is processed automatically is when you have an automatic payment plan setup. When you do not submit your payment, the policy will expire and the company will assume that you have purchased insurance elsewhere. This is why you need to be organized when you renew so that you can avoid a costly lapse.

It is very important that you know the terms of your policy when you are paying for car insurance cover. It is unfortunate that missing a single payment could result in lapses and serious penalties. To prevent this from happening, you can arrange automatic payments. If you want to find a company with a good payment policy, start comparing rates now by entering your zip code in our FREE tool below!  Compare the payment terms to see which is most beneficial to you as a consumer looking to avoid coverage lapses.

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