Q&A Topics

Friday, November 5, 2010 9:21:39 AM

Do late payments increase your auto insurance rates?

Most auto insurers give policyholders a grace period for paying their premium. If you make your payment within the grace period your policy will not be canceled. However, if you miss the grace period an insurer may raise your rate.

So, stay on top of your bills to make your car insurance more affordable. If you have late payments, your insurer may add a surcharge to your premium. Additionally paying your bills late can hurt your credit score. In most states, insurers use your credit score as one of the factors in determining rates. If you have poor credit, you may be charged more because you're considered a higher risk.

Drivers who allow their policies to lapse for any reason could wind up paying higher premiums and an initial 25 to 50 percent surcharge when they buy a new policy. Insurance companies charge these motorists more because they consider them to be irresponsible drivers and, therefore, higher risks. And if you accidentally let your insurance coverage lapse, you're also putting yourself at financial risk. If you are uninsured and have an accident, you will be responsible for any damage.