Preventing Liability From Lapsed Auto Coverage

When an insurance policy isn’t paid or another event causes it to lapse, the policyholder must personally accept any liability which occurs thereafter. It isn’t uncommon, though, for the formerly insured to try and reinstate their policy. Depending on the length of the lapse, this may be a difficult task, but an insurer must receive agreement from the policyholder than no events of liability took place during the lapse.

Obtaining a No Loss Letter

Assurance that no liability was incurred typically takes the form of a no loss letter. As the name implies, this is a letter from the policyholder agreeing that no losses occurred during the lapsed coverage, and their new or reinstated policy thus will not be applied to any prior events. The letter should include the following:

  • A statement agreeing to policy terms
  • Signature of policyholder
  • Agreement to pay any fees


Benefits of Minimized Liability

Insurers such as ATM offer coverage with receipt of a no loss letter. Minimizing liability benefits all parties involved, and with a no loss letter, you can ensure that you are not held responsible for any events that occurred during a lapse in coverage. This helps to keep costs low, maintain policy accessibility, and provide equal opportunity for coverage to all insurance applicants.