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6-Month vs. 12-Month Car Insurance: Which Should I Get?

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Jamie Smith
November 9, 2020

Getting a six-month car insurance policy is very common for most drivers. But what about an annual car insurance policy? Are there benefits to a six-month policy vs an annual? How do you decide which term policy to get?

When shopping for car insurance, insurers typically give you a quote for either a six-month policy or 12-month policy. Though you have the option to pay for your policy monthly, your premium is based on a six-month or annual term. 

Whether you get a six- or 12-month policy determines how long you are locking in a car insurance rate for. 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.

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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. 

Is a 6-month policy a good idea?

A six-month car insurance policy might be right for you if:

  • You expect to experience a major life change that could lower your rate. For instance, you may be planning on getting married or moving. 
  • 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. 

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12-month car insurance

Life is busy. And for many of us, putting our bills on autopilot is a tremendous help. If paying your auto insurance bill in full on an annual basis suits your budget, a 12-month policy is a good fit. 

Not only will you avoid any potential fees for missing a monthly payment, you may actually earn a discount from your insurer for paying in full. For car insurance companies, it means they spend less money per year filing these policies, and they know they have a customer for an entire year. 

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

  • You received a good rate and want to lock it infor a full year. 
  • You want to pay in full and avoid having to  remember to pay a bill every month or 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.

Can I switch insurance if I get an annual policy? 

If you choose an annual policy, you can still switch your insurer anytime.  but find a lower rate, don’t worry. You can switch car insurance anytime. Don’t suffer through poor customer service or high rates. There’s no need to wait for your existing policy to expire to shop for new car insurance. 

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.

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