Is 6-month or 12-month car insurance better?

Purchasing a 12-month car insurance policy is better than purchasing a 6-month car insurance policy if you’re a good driver with a clean driving record and the option is available to you. Six-month car insurance might be best if you have a moving violation or a few points on your license that will expire soon. The main benefit of a 12-month policy is that it locks in your rate for a year. Plus, if you pay your annual premium upfront, you can qualify for a discount and eliminate the hassle of more frequent due dates.

Some insurance companies still offer annual policy terms, along with a 6-month option, including Liberty Mutual, USAA, Erie, The Hartford, The General, Infinity, Safeco, and Unique. But it is becoming less common for insurance companies to offer 12-month terms because reviewing and adjusting rates more often is better for business. That’s why insurers default to 6-month policies and why most insurance-premium quotes assume a 6-month term.

Insurance companies revise rates at the end of a policy term. They largely consider changes to your driving record and claims history during that period. But even if your driving record and insurance profile have not changed, your rate can still go up. That’s because insurance companies regularly adjust rates for all consumers to account for pricing miscalculations and unexpected claims.

6-Month vs. 12-Month Car Insurance Policies

A 12-month car insurance policy tends to be more secure, given that car insurance rates overall usually go up over time. But that doesn’t necessarily mean you’re getting the best value. You still need to compare multiple companies for both 6- and 12-month policies to know you’ve found the best deal.

Six-month policies have some perks of their own, after all. More frequent policy renewals could potentially benefit drivers with less-than-perfect driving records who’ve since changed their ways. If you can keep your driving record clean and have a previous infraction due to expire in the next six months, your rates could go down.

A 6-month car insurance policy might also benefit drivers who will soon pay off a car loan as well as those who improve their credit. Car insurance companies use information from your credit report to calculate your rate, and the less debt you owe according to your report, the better it is for your credit standing. In addition, many lenders require extra coverage when you finance a car, such as comprehensive and collision. If you no longer want to keep as much coverage as the lender required, scaling back could lower the cost of your premium.

Whether you choose a 6-month or 12-month car insurance policy, it’s always better to pay in full. When you make monthly payments, you’ll probably be charged slightly more on your premiums and may also be subject to additional payment processing fees if you pay electronically. Even if these are only a couple of bucks a month, they can really add up over the term.