Why do most car insurance policies only last 6 months?

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Asked June 8, 2016

1 Answer


Most car insurance policies written for six months are beneficial for both the customer and the insurance company. Depending on a customer's preference, the main difference between a 6- and 12- month policy is going to be the premium, with a 12-month policy having a larger premium. However, that premium will not change during the duration of the policy, which is where having a six month policy can come in handy for most drivers. Understanding this key difference helps you choose a better policy for your budget with the future option of seeing your premiums improve.

Let's examine how a six month policy benefits the car insurance company first. Insuring drivers is taking a risk, so six months gives the auto insurance company plenty of time to assess whether or not your premium is worth what they quoted. For example, let's say you have a series of minor car accidents in a short amount of time. Once the six months has expired for your policy, your insurance company can rise your rates to reflect an appropriate amount of coverage for you. If this were a twelve-month policy, they would have to wait a year to raise your rates again. Six month policies allows auto insurers to quickly change rates in a short amount of time.

On the other hand, six month policies work for consumers in a similar way. Let's say you're a safe driver with a clean driving record who has just signed up for a new six month policy. Your driving record has remained cleaner than before with less fender-benders. After six months accident free, you decide to look elsewhere for cheaper rates. Your current policy may decide to lower your premiums to keep your business, or you may even be able to find a cheaper quote elsewhere.

Answered June 9, 2016 by key2616

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