A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 14, 2021

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Here's what you need to know...

  • Standard personal auto insurance policies are sold in terms
  • Once a policy is issued, the base rate that you’re quoted for coverage will remain fixed for the remainder of the term
  • Some carriers sell coverage that last for 6 months and other carriers sell policies that last for 12 months
  • When you purchase a policy with a 6-month term, the company can’t surcharge you for tickets and accidents until your next renewal date
  • If you buy a 6-month policy, you have the option to pay monthly, quarterly or semi-annually depending on your budget
  • While carriers are limited as to why they can cancel your policy, you’re free to cancel coverage mid-term for any reason

When you’re buying auto insurance for the first time, it’s only natural to have loads of questions. You need to know what a basic policy covers, what types of coverage options you can add on to a basic plan, and how insurers respond to claims to get the most out of your auto insurance policy. It’s also important that you find out how long the average term lasts so that you’re prepared to renewal your policy or shop around after the term is over. Compare car insurance rates now by using our FREE tool above!

When you’re comparing car insurance policy terms, you can choose between either a 6-month policy or a 12-month policy.

Both terms are available for purchase from carriers that sell products in the standard marketplace. If you’re not familiar with car insurance terms and why they’re important, it’s time to understand how the term benefits you and why more and more carriers are leaning towards 6-month terms over the annual alternative.

What is an auto insurance term?

A policy term is the duration of the car insurance policy through a specific carrier. If you already have insurance, you can find your policy term by looking at the effective date and the expiration date on your declaration’s page. Your declaration’s page will also define how much you’ll pay for coverage throughout the specified term and how much each coverage option costs for the entire duration of the policy.

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How long do auto insurance terms last?

How long your term will last will depend on the company you’re doing business with. If you’re buying personal coverage in the standard market, you’ll only have to choose between a policy that lasts for 6 months and a policy that lasts for a year. While 6-month and 12-month terms are standard, there are temporary policies available in the sub-standard market that last for a shorter period of time. Short-term policies only have day, week or month-long terms.

Why are terms so important for policyholders?

A term is more than just how long a policy lasts, it’s also how long your rates are guaranteed after your policy was issued. To understand the importance of insurance terms you need to understand how the insurance machine operates. When an insurance application is submitted for review, the company underwrites your policy and assigns you to a risk class.

After the 60-day binding period, the policy is issued and that risk class can’t change for the remainder of the term. This ensures that you’re charged the same rate per unit of coverage up until you add a new driver or a new vehicle. This is true even when you have a loss or when you’re convicted of a moving violation.

Why do most companies offer 6-month insurance terms?

Policies that last for 6 months must be underwritten twice as much as policies that last for a year. While this does cost the insurer more money on the administrative end, it’s actually beneficial for carriers to spend the time doing extra underwriting.

Six-month terms are beneficial in the sense that carriers are committed to insuring a household for a shorter period of time.

If the household has a serious loss or drivers in the home are convicted of speeding, the carrier can charge for the convictions sooner or set the policy up for a non-renewal. This means that the carrier can charge for surcharges and raise rates after a company-wide increase sooner than they could if the term they offered lasted for a year.

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Do all states allow companies to sell 6-month policies?

Every state has its own laws pertaining to auto insurance requirements. It’s important to review the laws and the regulations in your state before you go on a search for a 6-month policy. Just recently states like Massachusetts started to offer 6-month policies to give drivers more options. While these shorter terms are still available, state officials in Massachusetts do require all carriers to offer both semi-annual and annual terms to their clients.

Considering the Advantages of 6-month Insurance Terms

There are advantages and disadvantages to each standard term option. Considering the advantages on both sides will help you make the best choice when you’re trying to find a policy. Here are some benefits of shorter terms:

  • You may be better able to get a pay-in-full discount for paying your entire premium at once
  • If your moving violation is about to fall off of your record, a shorter term allows you to have the surcharge removed sooner
  • You can avoid paying processing fees for making installment payments
  • You’ll be able to evaluate your car insurance needs sooner

Considering the Advantages of Annual Terms

Annual terms tend to be more beneficial to policyholders. It’s important that you know that carriers offer payment arrangements for both term options so you’re not required to pay the policy in full when you secure 12 months of coverage. Here are some benefits to think about:

  • Your rates are guaranteed for longer
  • If you have an accident, you’ll have more time with lower rates so that you can shop around
  • If you’re convicted of a driving infraction, you’ll have more time to take traffic school to avoid surcharges
  • You’ll receive discounts for longer without having to provide proof
  • If there’s a statewide or company-wide rate increase, your rates won’t rise right away

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Do you have to stay with the insurer for your entire term?

Just because the insurer’s rates are locked in for the entire term doesn’t mean that you have to be a loyal customer. In fact, you’re free to change insurers or terminate your coverage at any time.

Just be aware that you’ll be exposed to loss if you terminate your coverage and you don’t have another policy in place.

If you’re in search of a 6-month car insurance plan, it’s time to shop around. It’s best to compare before you select a plan that could be overpriced. Start your shopping journey on the world wide web by using an online rate comparison tool. After you’ve compared rates through multiple carriers, choose the best company with the competitive rates and high customer satisfaction ratings so that you get the best of both worlds. Compare car insurance rates now by entering your zip code in our FREE tool below!