What Happens When You Don’t Pay Your Car Insurance?

Penny-pinching is turning into an art form these days, but take care where you decide to save. It could end up costing you more in the long-run. Car insurance, for instance, is one of those expenses you might be tempted to forgo. It’s true that the cheapest car insurance is no insurance at all, but letting your coverage lapse carries many obvious and not so obvious risks – all of them potentially more costly than paying for a policy.

Obvious Risks of Driving Without Car Insurance

If you’re making payments on your vehicle, the car’s lien holder requires that you carry your state’s minimum liability insurance plus comprehensive and collision. If you don’t carry the required coverage and the vehicle is stolen or wrecked, you’ll be paying to replace or repair it out of your own pocket. If you hit somebody else, you’ll be paying for his car repairs, too. And then there are the medical bills if you, your passengers and anyone you hit is insured.

You can be sued for everything you’re worth or ever will be worth if you injure another driver or pedestrian while driving without car insurance. Some states will also send you to jail.

Whether you or the bank owns your car, driving without insurance is against the law. The penalties for getting caught will depend on the state where you live. You can learn about the specific requirements and penalties of your location through our State Guides to Car Insurance Coverage in the Auto Insurance section of this website.

Not So Obvious Risks of Driving Without Car Insurance

Your lender can also buy a force-placed insurance policy on your behalf and then tack the cost onto your auto loan. Your lender is under no obligation to try to find the cheapest car insurance for you. Force-placed policies typically comes from a high-risk insurer and, consequently, cost significantly more than car insurance you purchase voluntarily.

What Happens If You Miss Your Car Insurance Payment?

Let your car insurance policy lapse or miss too many payments and you could be looking at higher rates when you try to reinstate it or buy a policy from another company. You’ll lose out on any continuous coverage discounts, too. And you may have to pay more upfront to secure a new policy.

Your insurance company will probably report you to your state department of motor vehicles when you cancel or let your car insurance lapse. Many states require this, and also have electronic notification systems in place to make it easier. Depending on where you live, you could find that not having proof of car insurance means you can’t register your car or renew your registration. Some states will even require that you surrender your registration, driver’s license and/or license plates until you can show proof of proper coverage. A few will even impound your vehicle. And, of course, you’ll be paying a fine to reinstate your various driving privileges.

Non-payment of any bill can show up as a black mark on your credit rating, making it harder for you to find cheap car insurance next time (or cheap credit, for that matter).

Driving without car insurance simply isn’t worth taking all those risks when you can shop for competitive car insurance easily on line.