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More than 24.2 million Americans reported they were unable to work at some point in the previous four weeks because their employers closed or lost business due to the COVID-19 pandemic, according to the most recent survey by the U.S. Bureau of Labor Statistics. Only 11.6% of respondents said they received some pay from their employer for hours not work, showing how the pandemic has continued to pummel workers’ jobs.
Widespread unemployment obviously has ripple effects to many parts of the economy and society. One little talked-about area is the impact it has on car insurance. If you cannot afford your car insurance and let it lapse but continue to drive, you could be setting yourself up for even more financial disaster. If you’re having financial difficulties due to COVID-19, you might qualify for assistance and be able to avoid cancellation for non-payment.
The Consequences of Not Having Car Insurance
Every state has some form of “financial responsibility” law. If you own a car, you are required to show proof that you can pay others’ car repair bills and medical expenses if you cause a car accident. Most car owners satisfy financial responsibility laws by purchasing car liability insurance.
If you cannot afford your car insurance and your policy is canceled, but you keep driving, there can be major financial and legal consequences. If you get pulled over by the police and cannot show proof of insurance, you could face fines, penalties and even jail time.
If you cause an accident and don’t have insurance, you’ll be stuck paying out of pocket for others’ car repairs and medical bills if they sue you. Nationwide, the average cost of a bodily injury liability claim is $19,166 and the average property damage liability claim is $4,146, according to the most recent report from the National Association of Insurance Commissioners.
Being uninsured isn’t a problem only for the people who are driving without insurance. Everyone ends up paying for others’ lack of auto insurance:
- If an uninsured driver hits you, they may not be “sueable” because they may not have funds to pay a legal judgment.
- Other drivers have to protect themselves by spending money on uninsured motorist coverage in case they’re hit by an uninsured driver.
- A large portion of uninsured drivers in a state can push up car insurance rates for everyone else. They’re still on the road causing accidents, and those accidents have to be absorbed by others’ collision and uninsured motorist coverage. Without everyone paying into the car insurance pool, those who are insured eventually foot the bill for uninsured accidents by paying higher rates.
A Nonprofit Wants to Help Drivers Pay for Car Insurance
SafetyNest, a 501(c)(3) nonprofit organization funded by Branch Insurance, hopes to help drivers who are having financial difficulties due to the coronavirus. SafetyNest says it will help pay car insurance premiums, up to $250 per approved application, through the end of 2020 for drivers who risk losing their auto insurance due to job loss.
“With so many people being impacted by the COVID-19 shutdowns and loss of work, we knew that now was the right time for us to make an impact and help our community,” said Charlie Wendland, president of SafetyNest, in a statement. “No one should have to choose between feeding their family and running the extreme risk of being uninsured.”
SafetyNest’s financial assistance is currently available in Arizona, Illinois, Missouri, Ohio and Texas. Residents of those states can apply online or call Branch Insurance at (833) 427-2624 to discuss eligibility.
Auto Insurance Companies Have Sent Refunds
At the outset of the COVID-19 pandemic and stay-at-home orders, many auto insurance companies extended grace periods and other relief to help customers who had financial difficulties. For example, some car insurance companies waived late fees, provided extended grace periods and offered payment plans in order to avoid canceling policies.
Many car insurance companies offered refunds and premium credits. The relief ranged from one-time payments to premium credits that ran from March through June, depending on the insurance company. However, since the initial refunds and credits, there has not been an industry-wide effort to provide additional relief during the summer or after.
Letting your car insurance lapse can have major financial consequences. If you are having difficulty paying your car insurance premium, contact your auto insurance agent right away and ask if the company can set up a payment plan or work with you another way.