Insurance companies offer car insurance policies in two different term lengths: 6 months, which is most common, and 12 months. Shoppers should beware of any insurance company offering a shorter term, as one only exists for temporary coverage of rental cars. Explore the minor differences between 6-month vs. 12-month car insurance policies.
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Is There a Big Difference Between 6-month and 12-month Car Insurance?
Beyond the term length, there is no major difference between 6-month and 12-month car insurance policies, though each has its own benefits and drawbacks. Ultimately, the decision depends on several factors including the policyholder’s budget, the type of coverage they need, and which policies are available in their area.
Advantages of 6-month Car Insurance Plans
A 6-month insurance policy can benefit both long- and short-term drivers. Insurance companies commonly offer 6-month insurance policies with perks like frequent rate reviews.
This is the shortest term possible for car insurance in the U.S.
Aside from rental car insurance, 6-month policies are the shortest available term insurance for purchase in the United States. A 6-month insurance policy is a natural choice for a driver who is planning to move out of the country or sell their car and stop driving within this period. However, plenty of long-term drivers can also take advantage of its benefits.
Reputable car insurance companies do not offer temporary insurance for terms shorter than 6 months, since it is not in their best financial interest to do so. Each state maintains its own regulations regarding temporary auto insurance. Drivers should only consider quotes from legitimate insurance companies offering 6-month insurance policies when shopping for coverage.
You could take advantage of improvements to your rate sooner
A 6-month insurance policy offers policyholders the opportunity to reevaluate their coverage more often. Most traffic tickets fall off your driving record in 3-5 years, which means drivers can expect higher rates during this period. However, if you’ve taken the necessary steps toward repairing your driving record, insurers can reassess your risk profile at the end of your 6-month policy and recalculate your insurance premium sooner than a 12-month plan.
The same goes for policyholders making the effort to improve their standing in other ways. Some insurance companies may re-evaluate the base premium rates for those who have improved their credit score within the 6-month period of the policy, though you may have to ask the insurer to do this. A 6-month policy enables drivers to compare rates more frequently to find the best deal.
You can switch policies sooner if you are dissatisfied
6-month policies allow drivers to switch plans sooner if they find a better rate elsewhere. In fact, policyholders enjoy the freedom to reevaluate after 6 months if they decide they are unsatisfied with any part of their existing coverage. The shorter term of a 6-month plan provides the opportunity to shop around for a plan more tailored to their needs after some trial and error.
While most 12-month plans allow customers to cancel at any time, canceling a policy early can result in steep cancellation fees. Repeatedly canceling early on multiple consecutive policies can also reflect poorly on your insurance history and cause future insurers to raise your rates.
These policies are more common
Auto insurance companies routinely offer 6-month car insurance policies, which means more accessibility and variety for drivers than 12-month plans. People shopping for 12-month policies might encounter some challenges, especially if they live in a remote area with limited providers and few coverage options.
Advantages of 12-month Car Insurance Plans
Some drivers can benefit from a longer period in between reevaluations of their coverage and rates. A 12-month plan can mean guaranteed low rates and more forgiving coverage terms.
You may get a discount for committing to a longer-term
Policyholders may earn rewards for committing to the longer term of a 12-month policy, though slightly harder to come by than the more common 6-month insurance policy. A 12-month policy enables policyholders to lock in a low rate for a full year, even if their driving record or credit score changes during that time.
Insurance companies reward customers for enrolling in a plan for 12 consecutive months and may also offer additional discounts for this show of commitment. For example, policyholders can sometimes save big by paying the full balance of their policy for the year upfront.
If you get traffic infractions, your rate will stay lower for longer
Enrollees in a 12-month insurance policy enjoy the benefits of extended low rates. Since your insurance rate is set based on a snapshot of your initial risk profile when you purchased your policy, if you get a ticket, your coverage will not be reassessed and your rate will not (potentially) be raised until those 12 months end.
In other words, drivers who receive an infraction on their record enjoy a longer grace period before it affects their insurance premium rates. While this minor extension helps lock in a lower rate in the short term, drivers should keep in mind that a traffic violation can still affect their insurance rates for at least the next several years.
If your credit history or score worsens, your rate will stay lower for longer
Similar to the driving infraction point, you can spend more time improving a declining credit score before it affects your car insurance rates. Drivers with a 12-month insurance policy enjoy a full year of credit-repair efforts before their insurance company reassesses their coverage and their rates, potentially raising the price of their premium due to their credit score. However, it should be noted that not every insurer will re-evaluate the applicant’s credit history and score at renewal.
Credit scores play an important role in determining your car insurance rates. They are also notoriously long-lasting and can take years to recover, once damaged. Drivers with a 12-month policy who take steps toward repairing their credit can make significant improvements during that year, however, compared to a shorter 6-month policy.
You do not have to shop around as often
While comparing rates regularly is necessary to make sure your current coverage serves your best financial interests, finding the right 12-month policy can help you minimize this time-consuming process. Committing to a full year of coverage can provide the peace of mind you need to trust that your coverage and your rate will stay consistent, and your budget will require less-frequent shopping around.
What Else to Consider When Shopping For Car Insurance
Beyond the length of the policy, other factors can impact the process of finding the right car insurance. Consider a variety of quotes, minimum requirements, policy types, and discounts.
Policy quotes are estimates from insurance companies for your cost of coverage. Insurance companies tailor their policy quotes to your unique circumstances. They take into account factors including your location, your driving record, and which discounts you may qualify for.
Generally, insurance companies assess the risk involved in extending coverage to you as a driver. Insurers look at prospective customers’ previous driving and financial activity to construct a profile of prospective customers based on how that customer might affect their bottom line.
Insurers typically charge higher rates to drivers they foresee requiring more costly coverage.
Drivers with few or no accidents in the last 3-5 years and a high credit score tend to receive the best rates. Most insurance companies start the process of providing a quote by checking a driver’s record through the department of motor vehicles, their claim history with their previous insurance company, and their credit-based insurance score.
Mandatory and Optional Coverages
Every state requires either minimum insurance coverage or some form of proof of financial responsibility for drivers. The most common mandatory coverage is for minimum liability, which protects you against bodily injury and property damage claims if you cause an auto accident.
Though uncommon, states including New Hampshire and Virginia do not mandate minimum liability coverage but require proof of financial liability to cover any injuries and damages that may occur in an accident. Drivers can incur steep fines and/or lose their licenses if they fail to meet state requirements for car insurance.
Drivers can also opt for additional coverage beyond their state’s minimum requirements to further protect themselves and their vehicles. For example, drivers can purchase protection that covers your car from damage by an act of nature, or personal injury protection or medical payments.
Drivers can choose from a wide variety of types of policies, depending on how often and how far they drive, on average, for work and recreation. Drivers who do not use their car very often or drive very far may benefit from telematics. Insurance companies may use telematics to assess rates on a pay-per-mile or usage-based basis.
Insurers also commonly offer the following non-standard car insurance types:
- High-risk Insurance: Drivers deemed a higher risk can often enroll in similar coverage as a standard customer but must pay a higher premium
- Pay-as-you-go Insurance: Insurers calculate a customer’s premium rate based on how many miles they drive instead of their projected risk
- Non-owner Car Insurance: Drivers who do not have access to a household vehicle or a car registered in their name may qualify for a non-owner insurance policy
Insurers may regularly review their customers’ accounts for rate discounts, including when a driver’s traffic ticket falls off their record or their credit score improves. But this is not always the case, so policyholders should be proactive in looking for additional opportunities for discounts through their insurer. Or, they may shop around among insurers that might offer deals like bundled policy discounts, good student discounts, or discounts for membership in an affiliate program such as AAA.