Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Paying your car insurance bill is a must if you want your coverage to stay active
  • Anyone who fails to make their payment without contacting their insurer will have a lapse of coverage
  • Some companies will offer their clients a grace period so that they have an extra one to 30 days to pay
  • If you can’t pay a quarterly, semi-annual, or annual payment this month, you can set up a monthly pay plan
  • When you don’t pay on time and the policy lapses, you may have time to reinstate the coverage with a payment

No one ever wants to face a financial situation where they can’t afford to pay their bills. Unfortunately, a financial emergency can rear its ugly head at the worst times.

If you have an unexpected car repair or a medical bill that you must pay to get treatment, there’s nothing that you can do but organize your bills and pay the ones that are a priority first.

Not everyone considers their auto insurance a priority but it is. You may want to pay your rent, your mortgage, and your car payment before you cover your insurance expenses, but it’s still one of the bills that you can’t get rid of.

You can see if you could get the same coverage for less. Enter your zip code above to compare car insurance quotes today.

If you’re unable to pay your car insurance this month because you’re short on money, here’s what you need to know:

Paying Your Insurance Upfront Is a Requirement

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When you’re applying for auto insurance, you’re asking the insurer to extend you an offer to enter into a contract.

At first, you may receive temporary coverage in the form of a binder. This temporary binder grants you protection while the company is looking over your application but there are no guarantees that you’ll get an offer.

If you were honest on the application, you’ll get an offer to enter into a six-month or 12-month contract. T

his contract says that you agree to pay your premiums up front the insurer agrees to indemnify you against loss for each of the coverage options that you carry. If you don’t pay before the insurer for the premiums due before the coverage period, the agreement isn’t in place.

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How often are your car insurance payments due?

Your payments could be due every month, every quarter, every six months, or every year depending on the payment plan that you have set up:

  • monthly
  • quarterly
  • semi-annually
  • annually

If you’re just starting off with a carrier, you can decide how you would like to make your payments. Each payment after that will fall into the installment plan that you choose.

If you decide that you’d like to pay your insurance bill quarterly, the payments will be due on the same day of the month every three months. If you want to pay semi-annually or annually, you’ll have to pay your premiums by the renewal date as long as you’re given the option to renew.

Do you get any extra time to pay your insurance payment?

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Having your bills due on the same day of the month each time can definitely help you budget, but there may be times where the payment is due right when you have other expenses come up. This is when a grace period will come in handy.

A grace period is a period of extra time that you’re given to pay your bill without your insurance lapsing. Not all companies give their client this extra time but many do.

The time that you’ll have to submit your payment can vary. In most cases, grace periods are between one and 30 days. You won’t get a grace period for payments due at your renewal.

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What happens if you don’t pay at renewal?

You have to pay your renewal payment by the date your new policy takes effect or the coverage won’t continue. There are no grace periods for renewals because they are new contracts that need to be secured by a payment.

Some companies offer automatic renewals where you can have the payment drafted from your account.

If you’re late paying your insurance but you make the payment within the grace period, you could be charged a late fee. The fee for being late is minimal.

If you are not able to pay at the moment and you still have coverage until you submit your payment, you’ll be happy that all you had to do was pay a $5 to $25 fee.

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What happens when you’re late paying the premiums?

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If you don’t have a grace period or you don’t pay before the grace period is up, your policy will cancel for non-payment. The coverage is terminated and any claims that you have while the coverage has been terminated will not be covered.

There aren’t many reasons a policy can be canceled in the middle of the term but non-payment is the most common one.

When your policy terminates, you will probably be given the option to reinstate your coverage with a lapse. A reinstatement is a good option for people who need coverage but don’t want to apply again.

Their rates will remain the same and the policy will have the same term. The only difference is there will be a lapse that can affect your insurance history.

Will you be penalized if the policy ends?

If your policy ends for non-payment or it non-renews without a replacement, you can be penalized by the state and your lender. You’re required to have mandatory insurance limits at all times.

You can’t get out of satisfying this requirement as long as insurance laws are compulsory in your state.

If you don’t, you could face criminal and civil penalties where you could lose your car or be ordered to pay a fine. Some states even arrest drivers when they don’t have insurance.

The penalties assessed by lenders aren’t as serious but they can still affect you financially. Most of the time, the lender will assess charges for lender insurance on the balance of your loan. This will raise your payment without protecting you.

If you can’t pay your insurance this month and you have a larger installment, you may want to change your payment plan for the time being. You can also consider paying with credit for now until you can afford to pay your bill off.

If you want to find lower premiums, use an online rate quote tool and see if you can save. Compare right now by entering your zip code below.

References:

  1. https://www.irmi.com/online/insurance-glossary/terms/i/insuring-agreement.aspx
  2. http://www.nasdaq.com/article/a-minute-past-midnight-poof-youre-uninsured-cm245273
  3. http://budgeting.thenest.com/happens-pay-car-insurance-after-due-date-33312.html
  4. https://www.thebalance.com/how-do-i-get-my-car-insurance-policy-reinstated-527405
  5. https://www.thebalance.com/insurance-binder-2645743
  6. https://www.irmi.com/online/insurance-glossary/terms/i/indemnity-payments.aspx
  7. https://www.thebalance.com/best-ways-to-make-your-car-insurance-payment-527399
  8. https://www.thebalance.com/what-is-an-insurance-renewal-527419
  9. https://consumerist.com/2007/05/22/10-confessions-of-a-progressive-insurance-rep/
  10. https://www.thebalance.com/what-is-a-car-insurance-grace-period-527413
  11. https://dmv.ny.gov/insurance/insurance-lapses
  12. https://www.thebalance.com/penalties-for-driving-without-car-insurance-in-california-527033