When shopping for car insurance, you will typically be given a quote for either a six-month policy or 12-month policy. Though insurers give you the option to pay for your policy monthly, quotes aren’t given by month.

When you buy a six- or 12-month policy, you are locking in a car insurance rate for that period of time. That means, your auto insurer can’t re-calculate your rates during this time. Any discounts that are applied will be good at least for the duration of that policy. 

Before you choose a car insurance policy, consider the benefits of a six-month policy versus an annual policy.

>>RELATED: Auto insurance policy basics

6-month car insurance

The six-month car insurance policy is the most common. It allows your insurance company to re-calculate rates on a more frequent basis. On one hand, you could benefit from lower rates or new discounts being applied every six months. On the other hand, you could experience a rate increase. 

Reasons a six-month car insurance policy would be right for you include:

  • You expect a major life change, such as getting married or moving, that could lower your rate.

  • You don’t have the best driving record and want to avoid a potential rate increase when your policy expires.

  • Your car is getting older or is almost paid off, and you may change your coverage soon.

  • Paying six months’ worth of car insurance fits your budget better than paying an annual premium upfront. 

12-month car insurance

Sometimes life gets busy and we forget to do things we normally do - like paying our car insurance bill. If you find yourself paying late fees often, an annual car insurance policy could be better suited to you. 

Car insurance companies are also grateful for customers that choose this option. They spend less money per year filing these policies, and they know they have a customer for an entire year. For this reason, many car insurance companies offer you a discount on your premium for choosing an annual policy.

If you choose an annual policy but find a lower rate, don’t worry. You can switch car insurance anytime. There’s no need to wait for your existing policy to expire.  

A 12-month policy could be right for you if:

  • You want your rate to be locked in for a full year.
  • You want the ease of not having to remember to pay a bill every six months.
  • Your work is seasonal or your income fluctuates throughout the year.
  • You prefer to pay your premium with an annual bonus or tax refund.
  • You don’t expect any major life changes or driving infractions and want to lock in your rate.

Is it better to pay in full or monthly?

Whether you choose a six-month or 12-month policy, your insurer will give you the option to either pay the entire premium at once or make monthly payments. Paying your policy in full can result in even more savings. If you can’t pay for the six-month or annual premium in full, you’ll be charged additional interest. Be sure to compare the monthly vs upfront payment rates and consider if the savings are worth it for you.

Ask your insurance company if they offer any other type of payment discounts. For instance, setting up automatic payment withdrawals from your bank could save you a little more money on your car insurance.

What factors determine car insurance rates

Your insurance provider will re-calculate your rate at the end of your policy period. Your car insurance rate is determined by a number of factors. Be aware of these when choosing the best auto insurance for you. For instance, if you know you’ll be adding a teen driver to your policy soon or getting married, you can choose the best policy duration for you. 

Car insurance rates have been on the rise every year, so be sure to review your policy closely. In addition to the factors like your age and driving record, external factors like the insurance company’s advertising spend could affect your rate. 

Common factors that determine car insurance rates:

  • Age and gender

  • Credit score

  • Driving record

  • Where you live

  • Type of car you drive

  • Miles driven daily

  • Auto insurance coverage types and amount

Each car insurance provider will have different discounts or benefits tied into your policy, so be sure to read your policy carefully.  Using an insurance quote comparison tool like Squeeze will also help you find the lowest rate. 

Getting the best car insurance

Saving money on your car insurance isn't just about selecting the right policy duration. You will want to get several car insurance quotes, and compare the level of coverage as well as the rate. 

Some other options that could help lower your car insurance:

  • Bundle car insurance with other types of insurance, such as homeowners or motorcycle.

  • Improve your credit score.

  • Check with your employer to see if they offer a group auto insurance plan.

  • Raise your deductible.

  • Opt out of comprehensive or collision coverage if your car is worth less than your current coverage costs.

  • Ask about discounts such as safe driver discounts, defensive driving certification savings or non-moving violation discounts.