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Understanding 6 Month vs. 12 Month Auto Insurance

understanding 6 month insurance vs 12

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We all like having choices in life. When it comes to auto insurance, you have state-mandated coverage requirements as well as some optional policies. This often includes the length of your policy term.

When you buy an insurance policy for your vehicle, it remains in place for a certain period. Most insurance companies issue policies for six months, but you can find insurers that will also issue policies for 12-month terms. Here are some of the differences between a six-month vs. 12-month auto insurance policy, including the pros and cons of each, so you can decide which one is best for you.

6-Month Auto Insurance Benefits

The benefits of purchasing a six-month auto insurance policy are the flexibility if you need to cancel and the ability to revise it.

The Flexibility

  • Choosing a six-month policy means you get an additional renewal period every year, so you can switch from one provider to another if you find a better policy or a company that offers better terms and rates.
  • Paying for your policy twice a year instead of once offers financial relief because you don’t have to come up with the entire annual premium at once.
  • Reevaluating your car insurance needs every six months means you can easily make adjustments that might save you money.

The Ability To Revise

  • If you have traffic violations that have increased your premium but will drop off soon, you don’t have to wait the entire year to have the insurance company revise your rates.
  • If you pay off your car loan, you might get lower rates sooner because you don’t have to wait for the end of the annual policy term.
  • More frequent recalculations of a six-month policy might also benefit you in other ways. If you have an improved credit score or a birthday that ages you out of a high-risk age group, your auto insurance might go down.

Who Should Buy 6-Month Auto Insurance?

When looking at six-month vs. 12-month auto insurance policies, many drivers can benefit from the shorter term. If you want to try out different insurance companies, it’s easier to do so with a six-month policy. You can find the insurer that suits your needs without having to wait a year to discover its benefits and drawbacks.

The Cons of 6-Month Auto Insurance

Six-month auto insurance policies have drawbacks in addition to their benefits. Short policy terms open up the possibility of a premium increase sooner than 12-month policies. Shorter terms also mean if your situation changes, previous discounts might not apply in the next policy term. Your insurance company can recalculate your rates based on the previous term, so your rates might go up if you have driving violations or get in an accident.

12-Month Auto Insurance

Most insurance companies offer 12-month policy terms in addition to six-month terms. Locking in your rate for the entire year might benefit you if you get into an accident. It will take longer for the insurer to reevaluate your policy, so if the company decides to raise your rates, you won’t see the increase as quickly as you would if you had a six-month policy term.

Who Should Buy 12-Month Auto Insurance?

A 12-month auto insurance policy is a good option for drivers who maintain clean driving records and already have the lowest possible rates. They can lock in these low rates for the next year and have peace of mind knowing they will keep them. These policies also benefit those who can afford to pay their annual premium in full. If you can make the payment, some insurers will offer an extra discount.

A 12-month policy can benefit drivers who have stable financial situations and personal lives. You might consider a 12-month policy if you aren’t planning to pay off your credit card debt soon, have little credit card debt, and don’t have plans to move to a city or town with lower insurance rates or become a homeowner. If your financial situation will not change in the next year, there’s no advantage to a shorter policy term, and you could benefit from the discount offered for paying the year in full.

The Cons of 12-Month Auto Insurance

The downside of a 12-month auto insurance policy is its lack of flexibility. If you pay off your car loan or have expiring traffic violations, you won’t see the benefit until the end of your policy term. Other financial changes, such as buying a home or paying off debt, could improve your credit score and lower your rates. You would miss out on these savings if you have a longer-term policy.

Another drawback to 12-month policies is not all insurance companies offer them, so if it’s the best type of policy for you, you might have to search to find one. A 12-month policy also does not grant you lower rates automatically.

If you’re unhappy with your insurer, you’ll have to wait longer to change providers with a 12-month policy. Because you’ve already paid for the entire year, you might be subject to cancellation fines if you terminate your policy early.

What Factors Determine Policy Rates?

Insurance companies take many things into consideration when calculating auto insurance rates, including:

  • Your age
  • The auto insurance company
  • Your marital status
  • Your driving record
  • Your gender (depending on the state)
  • Your driving record
  • The number of miles you commute daily
  • The amount of coverage you need
  • Your ZIP code

How Do I Know if a 6-Month or 12-Month Policy Is Right For Me?

If you have your insurance through a company that offers both six-month and 12-month auto insurance policies, weigh the pros and cons of each. Assess your current and future financial situation, consider your driving record, and think about how much flexibility you want. Once you consider all these factors, you can make an educated decision about the policy that’s best for you.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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