Why Most Car Insurance Policies Are Six Months Long

Six-month car insurance is an auto insurance policy with a six-month term. Your premiums are locked in for the duration of the policy. In contrast, a 12-month policy locks in your premiums for a full year.

Six-month policies work the same way as 12-month policies:

• Once you pay your first premium, your coverage starts on your policy’s effective date and ends on its expiration date.
• During the covered period, your insurance will cover accepted claims up to the limits you’ve selected in your policy.
• For collision and comprehensive coverage, you pay a deductible before your insurer contributes.

How Often do I Pay?

For most six-month policies, you will have the option to pay monthly, or pay in full. There are pros and cons to each..

Paying Monthly

• Pros
  • More manageable expenses, since monthly payments are smaller
  • Increased flexibility to switch insurance companies without waiting for a refund

• Cons
  • Missing a monthly payment could have consequences like late fees, or even policy cancellation
  • Potential higher overall cost, if you’re losing out on a paid-in-full discount

Paying in Full (Every Six Months):

• Pros
  • Many insurers will include discounts if you pay your premium upfront, resulting in an overall lower cost
  • Peace of mind knowing the premium is fully paid and you don’t have to worry about monthly payments

• Cons
  • Paying in full can be a large financial expense to make all at once, which many drivers cannot afford
  • If you want to switch providers your current company will issue a prorated refund for unused premiums, but it could take some time to receive

Is a Six-Month Policy the Same as Temporary Car Insurance?

Temporary car insurance and six-month car insurance are not the same. Temporary or short-term car insurance lasts less than six months, typically 30 days.

Why Insurance Companies Prefer Six-Month Policies

Auto insurance companies prefer six-month policies because they can adjust rates based on the customer’s claims or other losses, as well as respond to market conditions more quickly. For example, if a customer had a claim during their last policy period, the insurer can raise their rates more quickly with a six-month policy than with an annual policy.

Consumer Benefits

While six-month policies generally benefit the insurer over the consumer, there are situations where a six-month policy could lower your auto insurance costs.

• Possible rate decreases: If your rate factors changed in a positive way — for example, if a DUI is no longer on your driving record — you will see lower rates sooner by using a six-month policy.
• Paid-in-full discount: Because six-month policies cost half as much as annual policies, it’s more manageable to pay upfront, which could land you a discount.¹
• Increased flexibility: As the driver, you will enjoy more flexibility to switch or compare coverage frequently under a six-month policy without waiting for a big refund check.

While a six-month policy is now industry standard, there are still some companies that offer year-long options. Here are some companies that still have 12-month policies:

• Allstate
• USAA
• MetLife
• Kemper Specialty
• Safeco
• Erie
• Infinity
• The Hartford

Large, national insurers like GEICO and Progressive prefer six-month policies since they allow rates to be adjusted more frequently. But some customers might still want a 12-month policy, since they offer more pricing stability. Also, if you bundle home and auto, your insurer might allow you to shift to a 12-month policy instead of a standard six-month, so you should always speak to a representative or agent to learn your options.

When Six-Month is Better

• You’re improving your risk profile: If your credit score is going up, or you’re anticipating positive changes like improvements to your driving record.
• You want to reshop frequently: A shorter contract gives you the freedom to change your insurance more frequently, without worrying about cancellation fees or waiting for refunds.

When 12-Month is Better

• You value long-term stability: Your insurance rate will be locked in for a whole year, meaning that you won’t have to fear a mid-year price increase.
• Your insurer offers 12-month policies: You can take advantage of the opportunity to lock in rates without switching providers, which might also mean loyalty perks.

Aside from the policy term, these are some factors that affect car insurance rates. These are factors that might shift within six-month periods, and therefore change your premium.

• Age: Drivers under 25 usually see rate decreases as they get older and gain more experience behind the wheel.
• Credit score: Every state except Michigan, Massachusetts, California, and Hawaii lets insurance companies use credit scores to determine auto insurance premiums, so if your credit has improved, your rates will decrease.
• Driving history: Someone with a bad driving record will have higher rates than someone with a clean record.
• Marital status: Did you get married, divorced, widowed, or separated? If you got married, you’ll see lower car insurance rates in every state except Hawaii, Iowa, Massachusetts, Michigan, and Ohio.
• Gender: Men pay more for car insurance than women in every state except California, Florida, Massachusetts, Michigan, North Carolina, Ohio, and Pennsylvania. The difference is generally greatest for young drivers. If you’ve transitioned and have changed your gender on your driver’s license, your car insurance rates could change.
• Street address: If you move, your rates could increase or decrease depending on your state, locality, etc.
• Vehicle usage: If your mileage greatly increased or decreased, your premiums could change. Note that if you have a retired or totaled car, you can still get insurance for it, but getting it covered will be a different process than an operable car.

The shortest term for car insurance is 30 days, which is typical of most temporary car insurance policies. Temporary car insurance is up to four times more expensive than regular six- or 12-month policies. It’s only required in niche scenarios, unlike 6-month policies, which most drivers need all the time.

Here are some reasons you might need temporary car insurance:

• You need a vehicle for a road trip.
• You’re uninsured and you need to rent or borrow a car.
• You’re test-driving a car.
• Your car will be put into storage soon.

Note that most major insurers don’t offer temporary car insurance. There are usually cheaper and better alternatives, such as purchasing non-owner insurance, being added to the vehicle owner’s policy, or getting pay-per-mile insurance.

Six-month car insurance policies are now the standard. They help insurance companies by allowing them to adjust rates more frequently and stay competitive. In some cases, they help drivers by giving them more flexibility when it comes to their coverage. But, 12-month coverage is still accessible, and depending on your habits and financial goals, it could be better for you.

Six month policies benefit drivers whose risk profiles are improving, while 12-month policies benefit those who want to lock in rates over time.

Whichever policy term you choose, know your effective and expiration dates. Your insurance rates will increase if you have a gap in coverage, so it’s crucial to maintain your policy, even if you’re not driving at the time. Pay-per-mile and non-owner insurance are affordable ways to maintain your coverage.

To find the cheapest rates, get quotes from multiple insurers before your next renewal.