Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Auto insurance policies are sold in terms that last for a predetermined amount of time
  • The term is how long the contract will remain in effect at the current rating without any premium changes
  • In most states, there are insurers that offer six-month terms and others that offer 12-month terms
  • It’s much easier to find a six-month term in most states because the shorter term benefits the carrier
  • If you end up buying an annual policy, you have the option to cancel the coverage after six months if you’d like

You’re going to need car insurance for as long as you plan to drive. The moment that you buy a car or you’re given a vehicle, you’ll have to learn the ins and outs of insurance.

In most states, failing to buy insurance isn’t only dangerous, it’s considered a Class C misdemeanor crime.

You never want to go without insurance in a state where the protection is mandatory. You also don’t want to secure a policy that will last much longer than you actually need it.

Compare car insurance quotes side-by-side and get the coverage you need for the best price.

When you only intend on owning a car for the next six months, you might not be interested in paying for coverage that will last for the next year. Here’s how to buy insurance for six months:

Know How Auto Insurance Terms Work

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When you buy an insurance policy, there’s has to be a limit to how long the policy will last. Just like your home or your health insurance, your auto insurance will last for a specified period of time.

In the personal car insurance market, the period of time that the policy lasts is called the policy term or the policy period.

Policies are sold to consumers in terms for a reason. When a policy is underwritten and issued, the coverage will officially take effect. After issuance, the carrier can’t change your rate class for the entire term, even if you end up having an accident shortly after you buy your policy.

If carriers sold you long terms that lasted years, it would put the company at risk of charging a low-risk premium to a now high-risk driver.

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What are the most common terms that you can select?

When you’re buying standard car insurance on a personal vehicle that you own, you can choose between a six-month policy and a 12-month policy.

If you choose a six-month policy, the contract will renew twice each year. Just because the policy only lasts for six months each term doesn’t mean that you won’t be able to renew the coverage with the same carrier.

Traditional car insurance policies are only sold in six- and 12-month terms, but there are also sub-standard specialty products available for drivers with unique needs.

If you’re only going to be driving for days or weeks at a time, you might be better off buying a temporary short-term policy that will provide you with protection for up to 30 days.

Every state has different rules that all licensed insurance companies have to follow. In some states, the duration of the term offered doesn’t matter as long as it’s either six months or 12 months in length.

In other states, the state officials have ordered that companies must offer six-month and 12-month products to all of their clients.

What happens after an auto insurance term is up?

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When a term ends, it’s up to the insurance company to decide if you still qualify for coverage. When you qualify for coverage based on your experience, driving record, and accident history, you’ll receive renewal paperwork in the mail.

The renewal paperwork will establish a new rate for coverage that lasts for the next term.

Underwriters are assigned to policies when the term is about to expire. It’s the underwriter’s job to look over the rating factors and run reports.

Carriers have their own protocols. Some of them will run your motor vehicle report every renewal and others only run these reports every couple of years.

If you have infractions that make you a higher risk, your rates could go up or you could receive a non-renewal notice in the mail.

Why is it advised to select a 12-month term?

If your carrier offers both terms or you’re trying to choose between both options, most experts advise consumers to purchase 12-month policies.

In some states, a policy that lasts 12 months isn’t an option, but there are states that require both options. When the option presents itself, it’s in your best interest to take the longer term.

Auto insurance terms that last longer are beneficial to the consumer because the rate is locked in for longer. You’ll know how much you’ll pay for your coverage for longer with a 12-month policy.

You also don’t have to worry about paying a surcharge for a ticket or an accident for longer is either happens. If you don’t need the coverage for the entire term, you always have the option to cancel it early.

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What are some things you have to consider if you buy a longer term?

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If there’s a chance that you’ll only need your coverage for six months, there are still some things to consider before you take out an annual policy.

You’re allowed to cancel your insurance at any time no matter what company you’re with, but sometimes the carrier will charge you a fee. This fee is called a short-rate or early termination fee.

If the insurer charges a fee, you better assess that fee to decide if it makes sense to buy a longer term.

The short-rate fees that are a percentage of the unearned premiums could be high if you’re canceling your policy halfway through the term because of all of the time that’s left on the term.

That means that you’ll pay a percentage of the premiums that you don’t pay. If the fee is 10 percent and you owe $400 on the contract, you’ll pay a $40 fee. If it’s a fixed fee, the charge is the same no matter when you cancel.

You can buy a policy that lasts for six months, but that’s not always in your interest. If you want a longer term but can’t afford to pay the premiums in full, you can always set up a payment plan where you pay semi-annually, quarterly, or monthly.

You should start getting quotes for coverage online to compare rates and secure coverage right here.

References:

  1. https://www.thebalance.com/what-is-a-policy-period-527306
  2. http://www.mass.gov/ago/consumer-resources/consumer-information/auto-and-vehicle-insurance/understanding-insurance.html
  3. https://www.thebalance.com/can-i-cancel-car-insurance-anytime-527400
  4. http://www.iii.org/issue-update/compulsory-auto-uninsured-motorists
  5. http://www.in.gov/idoi/2579.htm
  6. https://www.thebalance.com/how-long-will-i-be-a-high-risk-driver-527279
  7. http://www.insurance.ca.gov/01-consumers/105-type/95-guides/01-auto/auto101.cfm
  8. https://www.thebalance.com/can-i-get-temporary-car-insurance-in-california-527034
  9. https://www.thebalance.com/what-is-an-insurance-renewal-527419
  10. http://www.iii.org/article/is-there-a-difference-between-cancellation-and-nonrenewal
  11. https://www.floridabar.org/tfb/TFBConsum.nsf/0a92a6dc28e76ae58525700a005d0d53/bf33d30e9b73f8df85257405007bd593!OpenDocument
  12. https://www.thebalance.com/what-is-a-car-insurance-surcharge-527252
  13. https://www.irmi.com/online/insurance-glossary/terms/s/short-rate-cancellation.aspx