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When choosing between a six-month vs. a 12-month auto insurance policy, you should decide whether your priority is flexibility or locked-in rates
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Rashawn Mitchner is a MarketWatch Guides team editor with over 10 years of experience covering personal finance, loans, insurance and warranty topics.
When you shop for coverage, you’ll likely have to decide between a six-month vs. 12-month auto insurance policy. There are pros and cons to each option, but they function in the same way. We at the MarketWatch Guides Team will explain the difference between six-month and 12-month auto insurance policies, the benefits of each and how much they may cost.
No matter what policy length you choose, you should compare quotes from a few of the best car insurance companies on the market. We’ll provide a couple of recommendations at the end of this article.
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The length of time an auto insurance policy is in effect is called the policy term. Most insurers offer at least two term lengths: six months and 12 months. A six-month car insurance policy comes up for renewal twice a year, while customers with annual car insurance can renew their policies every 12 months.
Both kinds of policies function in the same manner. Your car is protected for the entire policy term whether you choose six months or a full year. Most insurers offer payment plans, meaning you can choose to pay your car insurance premium in monthly installments or all at once. Depending on your provider, you may be eligible for a car insurance discount if you pay your entire premium up front.
The nice thing about having a 12-month term is that your car insurance rate will be locked in for an entire year, so you’ll know what to expect from month to month. If you opt to pay your premium annually, you won’t need to worry about monthly payments at all.
Having an annual policy can also make budgeting simpler. Keep in mind, though, that your rates will change if you add or remove a driver or vehicle from your policy.
A six-month policy allows for a bit more flexibility than a 12-month policy. Auto insurance companies revise rates at the end of the policy period, so the cost of your insurance coverage may decrease more quickly. If you haven’t filed a claim or you have traffic infractions fall off of your record before you renew your policy, you may get a lower rate when it’s time to renew.
In the sections below, we’ll take a look at how much liability-only and full-coverage policies cost for six-month and 12-month terms. We used data from Quadrant Information Services to find average prices. These rates are based on a married 35-year-old driver with good credit and a clean driving record.
Based on our research, we found that USAA has the cheapest six-month and 12-month car insurance policies on average. Note that USAA is only available to active-duty military members, veterans and their families. Of the large providers we looked at, Farmers tends to have the most expensive coverage.
Below is a table with average costs for a six-month auto insurance policy.
Below is a table with average costs for a 12-month auto insurance policy.
Aside from the length of the policy, there isn’t much of a difference between six-month and 12-month auto insurance. Six-month policies allow for a bit more flexibility as well as a chance to secure lower rates sooner. Twelve-month policies help for budgeting since policyholders only see rate increases during the year if they add another vehicle or driver.
Our team reviewed the top auto insurance providers in the nation. To find the best rates for your insurance needs, compare quotes from multiple insurers.
Over the years, State Farm has developed a strong reputation for low rates and excellent customer service. Young drivers can find affordable rates with State Farm, as the company offers a large discount for good students. In addition, the State Farm Drive Safe and Save™ telematics insurance program offers discounts for people who practice safe driving habits.
Keep reading: State Farm insurance review
Based on our research, we’ve found that Geico often offers some of the cheapest car insurance. An average full-coverage policy from Geico can be as much as 24% cheaper than the national average. The company also offers a wide variety of discounts, including multi-vehicle and multi-policy discounts.
Keep reading: Geico insurance review
Source: Automoblog
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In general, paying your car insurance premium annually rather than monthly is the cheapest option. Providers incur processing costs if you pay your premium in installments, and those costs get folded into your monthly payment. Most insurers offer a discount if you pay in full because it keeps their costs down.
If you have a six-month policy, the cost of coverage could go down when you renew. This isn’t a guarantee, however, and it depends on a few factors. If you have any traffic violations that fall off of your driving record or if you haven’t filed a claim, your rates may decrease. But if you get into an at-fault accident or get a speeding ticket, your rates will likely increase after six months.
Six-month policy terms allow insurance companies to reevaluate the cost of your coverage more frequently.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
Our credentials:
*Data accurate at time of publication.
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