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Car insurance policies are sold for a specific premium and are in effect for incremental periods. Most regular car insurance policies remain in effect for six months or 12 months. At the end of the policy period, your policy may then renew at a different premium. Most auto insurance companies offer either six-month policies or 12-month policies, but some may let you choose your preference. Along with other unique policy traits, you should consider the pros and cons to each policy length before selecting which policy to purchase.
6-month vs. 12-month car insurance policies
The main difference between six-month vs. and 12-month car insurance policies is the duration of the policy period. At the end of the policy period, your insurance company will review your recent claims history, driving record and other rating factors to make adjustments to your premium as necessary. Six-month policies are evaluated twice a year, while 12-month policies are only evaluated once a year.
Another difference between these two policy lengths is the price. In most cases, a six-month policy is going to be cheaper than a 12-month policy because you are paying for coverage over a shorter period of time. However, if you compare your car insurance price on a monthly basis, it may not be much different between a six-month policy and a 12-month policy.
Benefits of 6-month car insurance
Six-month car insurance policies are common, and many of the largest car insurance providers sell six-month policies. Six-month car insurance policies could allow you greater flexibility when canceling your policy. Some companies charge cancellation fees if you cancel in the middle of your policy term. If this is the case with your company, a six-month policy would give you an additional renewal period each year to decide to cancel your car insurance if you want to switch providers.
Another potential benefit is that the insurance company will review your rate twice per year, rather than just once per year. If you have recently improved your credit score (in most states), taken a defensive driving course or had a violation removed from your record, your car insurance premium could actually decrease at your next renewal. With a six-month policy, you could reap the rewards of a lower rate more quickly than you would with a 12-month policy.
However, the more frequent rate revision can also be a drawback. A six-month policy gives the insurance company two chances each year to increase your premium. Depending on your driving record and other rating factors, you could see a premium increase twice per year instead of just once.
Benefits of 12-month car insurance
The biggest advantage of a 12-month car insurance policy is that your rate is locked in for a full year, unless you make changes. This could be ideal for people who have recently filed a claim or gotten a ticket, as it may take longer for a car insurance company to apply a surcharge. Increases due to driving incidents are typically applied at the renewal period, so having only one renewal each year can be beneficial.
Another potential benefit is the ability to select your policy, pay your premium, and not have to worry about your coverage until the following year. When you renew every six months, you will have to remember to replace your expired policy ID cards twice a year so you have the most current information in your wallet and your vehicle. Annual policies can be a great option for busy people who have a hard time keeping up with frequent changes.
However, this does not mean that your premium stays the same for your entire 12-month policy period. If you make changes to the policy like adding a driver, changing a vehicle or updating your coverage, your premium will change midterm.
How do I know which policy is right for me?
Many companies do not offer a choice between six- and 12-month policies, so you will not likely need to choose between two policy lengths within the same company. Most companies default to six-month terms or 12-month terms, so choosing a preferred length could mean choosing between different companies. But if you do have a choice, the decision to purchase a six-month vs. 12-month policy should be based on your individual needs. You may want to weigh the advantages and drawbacks of each one before you make a decision.
Choosing a six-month policy may be a good option for drivers who have a mostly clean record, with no recent claims or major violations, and do not mind the twice yearly rate review. Six-month policies may also be a good choice if you want to have the freedom to cancel your policy more frequently and avoid cancellation fees, if your company charges them.
In general, insurance agents tend to recommend 12-month policies, if you have a choice, to avoid the risk of twice annual premium increases. However, you may want to keep in mind that not everyone qualifies for a 12-month policy. Even among companies that offer both terms, some carriers use 12-month terms as a default but offer six-month terms to drivers with poor driving records or poor credit.
