Reasons for auto insurance coverage gaps.

A gap in insurance coverage typically occurs when a policy has been canceled for nonpayment of premiums, or when the policy contract is voided for other reasons.
 
In some states any amount of time your vehicle is registered but not insured may cause not only a lapse in insurance coverage, but your registration may be suspended.

There are many reasons for gaps in auto insurance coverage, for example, if there is time delay between your insurance policy being terminated and the effective date of a new insurance policy, this may cause unacceptable proof of continued auto insurance coverage. If the gap in policies are over a certain period, this may cause suspension of your driver's license.

Once new coverage is obtained and verified within an allotted period of time, which is determined by state guidelines, there should not be any lapse in coverage, therefore no penalties and/or fees will be applied to the policy holder.

Some states require insurance companies to notify the DMV every time new insurance is obtained and/or whenever coverage ends. Once the information has been received by the DMV, it will be determined if there were any gaps in coverage and if there are any fees to be assessed.

Penalties and fees for gaps in auto insurance.

A gap in auto insurance coverage is any length of time the policyholder has had an interruption in auto insurance coverage. Changing insurance carriers or insuring different cars does not constitute a gap in coverage, unless you let your auto insurance lapse or don't replace it by your renewal date or nonpayment of the policy premium.

For nonpayment of premiums, the gap may cause the policyholder to incur a penalty for any lapse of the auto insurance. These penalties will vary depending on the state you live and the state in which the vehicle is registered. The policyholder will be notified of reinstatement fees and should be paid at once to minimize further consequences.

If your insurance policy has terminated, it generally should not be a problem to find a new insurance company to cover you. However, the policyholder may experience an increase in rate of the policy for any lapse in coverage.

If no new insurance information is received within the time period allowed, a  "Notice of Pending Suspension" would be sent to the vehicle's registered owner advising the owner their vehicle's registration is subject to suspension. The letter will include information regarding what is required to avoid suspension and all penalties and fines.

Driving a vehicle with a canceled, suspended or revoked registration in most states is a misdemeanor and may result in the impoundment of the vehicle by law enforcement when discovered.