Unfortunately, we all run into unexpected emergencies, and sometimes important things can get overlooked. Other times, we hit financial crises and we have to choose one bill to pay and one to ignore. While these times are difficult and often unavoidable, it is important to be informed about what can happen if you allow your car insurance policy to lapse. It is illegal in all states for you to operate an uninsured vehicle, and the punishment for doing so can involve anything from getting your car impounded to paying heavy fines. So if you do end up being forced to let you car insurance policy lapse, it is vital that you do not drive your car until you get the policy reinstated. Most states have their own definition of what a "lapse" is, but it's usually around 7 to 10 days. In most states, there are fees associated with allowing your car insurance policy to lapse, and in some cases, repeat offenders could be subject to having their registration suspended. And in any of these cases, being stopped by a police officer while your insurance is lapsed or your registration is suspended will result in further penalties.

It is not just the government that is interested in you maintaining current car insurance. Car insurance providers also look at whether or not you have had lapses in your coverage, and they may question you about lapses that show up. There are certain situations where it is permissible to allow your car insurance to lapse, but they differ from state to state. Some of the situations might include a vehicle being wrecked or otherwise inoperable, a vehicle being sold, the vehicle's owner moving out of state, or even the vehicle being used seasonally for agricultural purposes. Again, these caveats will vary from state to state, and most will require you to sign an affidavit swearing to the reasons that you allowed the car insurance to lapse. In most states, you will need to send this affidavit to the local license tag office, but it's always best to check the rules for your state specifically. It's always better safe than sorry.