6-month vs. 12-month car insurance policies

The main difference between six-month vs. and 12-month car insurance policies is the duration of the policy period. At the end of the policy period, your insurance company will review your recent claims history, driving record and other rating factors to make adjustments to your premium as necessary. Six-month policies are evaluated twice a year, while 12-month policies are only evaluated once a year.

Another difference between these two policy lengths is the price, at least as it relates to paying in full. Although your term length does not generally affect your average cost (or base premium), a six-month policy will be cheaper because you are paying for coverage over a shorter period of time. However, if you compare your car insurance price on a monthly basis, it may not be much different between a six-month and a 12-month policy.

What is a 6-month auto insurance policy?

When you get a car insurance quote, you may have the option to choose between a six-month or a 12-month policy. While not all companies give you this choice, knowing that different policy terms exist may be helpful. A six-month car insurance policy simply means that your policy is effective and priced for a period of six months before it will be up for renewal.

Pros of a 6-month auto policy

• Policy flexibility: Although you can switch auto insurance companies for any reason at any time, some carriers may apply a cancellation fee if you cancel your policy mid-term. If you are unhappy with your insurance carrier, a six-month policy means you may not have to wait as long for your renewal period to come up so you can change providers.
• Driving activity is re-evaluated more frequently: Some people may benefit from more frequent policy reviews. High-risk drivers, for example, might find a six-month policy attractive. When tickets or accidents reach a certain age, typically three to five years, they may no longer be a surcharge on your policy. Each time your policy renews, your insurance company may remove any surcharges that no longer apply.
• Paying in full may be more accessible: Some carriers extend discounts for customers who pay their policy in full, rather than in monthly installments. If paying a 12-month policy in full doesn’t work with your budget, opting for a six-month policy could make paying in full more accessible.

Cons of a 6-month auto policy

• Premium increases: When you purchase a 12-month auto insurance policy, your premium will typically remain the same for an entire year (unless you make changes like adding or removing a vehicle or driver), but with a semi-annual policy that renews every six months, you could face rate increases sooner or more often.
• Potential to forget renewal dates: When you purchase a 12-month policy, you have the option to pay for the entire expense of your policy for a full year upfront. When you have a six-month policy, you might be more likely to forget your renewal dates, since they occur twice a year, and could potentially miss a payment, causing a lapse in insurance coverage.
• Possible missed discounts: If you no longer qualify for a discount after your policy renews, a six-month policy could mean you lose those savings sooner. Discounts for new policyholders, for example, could net more savings over a 12-month period.

What is a 12-month auto insurance policy?

A 12-month auto insurance policy is the same as a 6-month policy, except that it is active for 12 months instead of six months. Many major carriers only offer six-month policies, but some may give you the option of choosing between the two (or only give you the option of a 12-month policy).

Pros of a 12-month auto policy

• Less frequent premium fluctuations: Suppose you cause an accident during your policy term that will lead your carrier to add a surcharge to your policy at your renewal. In that case, you could have more time surcharge-free on a 12-month policy because you’ll have more time between renewals.
• May be easier to remember renewal dates: Since a 12-month auto policy has half as many renewal dates as a six-month policy, you may be more inclined to remember your policy renewal date. This could be important for policyholders who aren’t on auto-pay and prefer to pay in full.
• May not need to requalify for discounts as often: Periodically, you might be required to provide proof to maintain some discounts (the good student discount, for example). Although your car insurance company probably won’t need you to provide proof at every renewal, it will most likely be on a renewal date when you do have to send in documentation. Since renewals happen less frequently with a 12-month policy, you may be able to cut down on how often you send paperwork to your carrier.

Cons of a 12-month auto policy

• Less policy flexibility: Some companies charge an early cancellation fee if you terminate your policy in the middle of your term. If you want to cancel but also avoid this fee, you’ll have to wait until your renewal date (which could be further on a 12-month auto policy vs. a six-month auto policy).
• Driving activity isn’t re-evaluated as frequently: Because a 12-month policy doesn’t renew as frequently as a six-month policy, surcharges for accidents and tickets are not removed as often. For instance, if an accident surcharge reaches maturity and is eligible to be removed in June, but your policy doesn’t renew until December, you’ll have to wait until December for the surcharge to “fall off.”
• Harder to pay in full: Although your total premium may not differ much on a 12-month car insurance policy compared to a six-month policy, it could be harder to pay a 12-month policy in full since you will be paying for the entire year’s worth of insurance upfront.

How do I know which policy is right for me?

Many companies do not offer a choice between six- and 12-month policies, so you will not likely need to choose between two policy lengths within the same company. Most companies default to six-month terms or 12-month terms, so choosing a preferred length could mean choosing between different companies. But if you do have a choice, the best car insurance company and policy term length depends on your individual needs. You may want to weigh the advantages and drawbacks of each one before you make a decision.

Choosing a six-month policy may be a good option for drivers who have a mostly clean record, with no recent claims or major violations, and do not mind the twice-yearly rate review. Six-month policies may also be a good choice if you want to have the freedom to cancel your policy more frequently and avoid cancellation fees, if your company charges them.

On the other hand, a 12-month policy may offer the cheapest car insurance for some since you avoid the risk of twice annual premium increases. However, you may want to keep in mind that not everyone qualifies for a 12-month policy. Even among companies that offer both terms, some carriers use 12-month terms as a default but offer six-month terms to drivers with poor driving records or poor credit.