As you shop for car insurance you might notice that most insurance companies only offer quotes for 6-month policies and wonder why that is.
It’s not as arbitrary as it sounds. Six-month policies allow your insurance company to periodically reevaluate the risk they assume by insuring you. Every time your policy is coming due to expire, your insurance company automatically verifies your current driving record with the DMV before they issue you a renewal. Did you get a speeding ticket since your last insurance payment? If your record was tarnished in any way, you can expect your rates to go up. They automatically check your credit record as well. Did slower bill payments because of a job loss result in a reduction of your credit score? If your credit score is lower than when you first applied for coverage, again, you will probably see an increase in your insurance costs.
By issuing you a policy that expires in six months, your insurance company can adjust your premium to reflect changes in your personal circumstances much sooner than if they had guaranteed your rates for a full year. If you’ve had a string of bad luck, the company can also get rid of you more quickly if they issued you a six-month policy.
Even if you’ve had several accidents, most states prohibit your insurance company from canceling your policy mid-term as long as you pay your premium on time. However, they are allowed to refuse to renew your policy as long as they notify you of their intentions in advance of the expiration date.
So if your insurance company gave you a twelve-month policy and you total your car one month later, you will probably not have to worry about them canceling your insurance until it expires in eleven months. If they only gave you a six-month policy, you might have to look for a replacement a lot sooner.
Six-Months Policies Can Help Keep Rates Low For Good Drivers
Does it sound like the deck is stacked in favor of the insurance company? In many cases it is, but a six-month policy can also work to your advantage. If you have an accident on your record that is about to be erased (which typically happens after 3 years), you will be able to see the benefits of its removal sooner if you have a six-month policy. If you have a twelve-month policy, however, your rates won’t be reduced until those twelve months pass.
The rates charged by insurance companies vary, and you can quickly check online to see how your renewal price compares to others. If you have a clean record, then you’re in the driver’s seat. If the premium that your insurance company wants you to pay is too high, then tell them how much you can save if you switch to one of their competitors. Sometimes they will give you a discount just to keep your business because they know you are a good driver. And if you’re happy with your premium, ask the company if they’ll agree to lock in those low rates for a whole year, instead of just six months!