Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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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, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Feb 19, 2016

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Here's what you need to know...

  • All standard car insurance policies have an expiration date
  • Policy terms, also known as policy periods, will last either 6 months or 12 months in length
  • When a policy approaches renewal, the risk is assessed about 45 days before the policy’s expiration date
  • If a household is deemed to be too risky for coverage, the company will set the policy up for non-renewal and a notice will be sent advising the policyholder to find new coverage
  • If your risk class hasn’t changed and your policy is set up for automatic payments, there’s a chance that you can request that the company automatically renew the policy for a new term
  • The rates that you pay for the new term can change even if the policy is set up for an automatic renewal, but the term length will remain the same

When you buy car insurance, the policy you’re agreeing to pay for will only last for a specified period. Experts in the insurance world call this period of time a policy term. Once the term is up, the insurer decides if you’re still eligible for coverage by assessing your risk. If the company decides that you’re not too much of a risk, you’ll be offered the option to renew. Compare car insurance rates now by using our FREE tool above! Some consumers may go years with the same company without making any changes to their policy while others choose to move around the marketplace looking for the best rates.

If you’re a loyal customer who intends on buying a policy through a reputable insurer and staying with that insurer for years, it’s important that you keep track of your renewal dates.

Loyal policyholders keep the same policy numbers, but their policy terms do change every time the current policy period comes up for expiration. Whether or not a renewal will be processed automatically depends on several different factors.

Why do car insurance policies even renew?

When you buy an insurance policy, you’re entering into an insuring agreement with a carrier. Essentially, you’re agreeing to pay premiums to the carrier in exchange for the insurer’s promise to provide coverage to you as detailed on your declaration’s page.

Insuring agreements can’t last forever. Before a company even agrees to take on a vehicle owner as a client, they do their due diligence and determine how much exposure there is to loss. If a driver in the home is likely to have a loss, the company might decide against entering into the insuring agreement. Since factors that present risk can change throughout a person’s life, it only makes sense for the company to commit to entering into a contract with a household for a limited period of time. This is the primary reason insurance companies sell policies in terms.

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What is the average length of a car insurance term?

Each state has their own rules and regulations surrounding the terms that an insurance company must offer. If you’re carrying a standard policy, your policy term will either last for 6 months of 12 months at a time. One easy way to find your term is by looking at your auto insurance ID cards or your declarations page. On both of these documents, the term is listed next to the policy number. It’s important to note that your policy number won’t change if you stay with the same insurer but start a new term.

How does selecting a longer term protect you as a policyholder?

While there are some cases where a 6-month term can work to your advantage, most policyholders benefit from carrying annual policies. For policyholders, there’s peace of mind in knowing that you’re guaranteed to pay a certain premium for a specified time.

The insurer can’t change your premiums during the term as long as you don’t make changes to the covered vehicles, drivers or coverage options.

As long as your intentions are to find a policy and stick with it, it’s best to shop around and find a reputable insurer offering the most competitive rate and the longest term.

When can an insurance company change your rates?

When your policy period is about to expire, the insurance company will underwrite your policy just like it did when you applied for coverage the first time. Putting this time and effort into assessing risk isn’t a waste of time to the insurer. In the company’s eyes, this is the only window of time that they have to decide if you’re still a good customer to do business with.

If you have a loss or you’ve been convicted of a driving infraction, your rates will either change or you’ll be sent a non-renewal letter. Here are the reasons rates change:

  • A higher rate filing has been approved through the Department of Insurance
  • Your driving record or accident record had changed
  • You’ve gained more experience
  • You live in a new rating territory
  • Your vehicle’s rate classification has changed
  • There’s a new driver in the home that must be rated
  • Your credit record has changed

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What rating factors will the insurer review at renewal?

Policy premiums aren’t just pulled out of thin air. Companies spend millions on actuarial studies and research to determine how much they should charge a client based on a long list of rating factors. Here are some of the factors that are reviewed every time a policy is underwritten:

  • Motor Vehicle Reports (MVR)
  • Accident reports and claims data
  • Number of years each driver has been licensed
  • The credit-based insurance score of the named insured
  • The safety rating of the vehicle insured
  • How much you use your car and for what purpose
  • Where you live and where your vehicle is parked
  • Your gender and marital status

When do you find out how much your renewal premium is?

When your policy renewal will be processed depends on the state. In some states, companies must send out a renewal notice within 45 days of the renewal. In other states, like Texas, the company is only required to give 30 days notice. At this time, you’ll receive a renewal declaration’s page or a document explaining why the insurer is deciding against extending you an offer for coverage.

Do you need to take action?

If you physically make a payment to continue your coverage each time your payment is due, you need to do the same when your policy renews. If, however, you have automatic payments set up, there’s a good chance the payment will be deducted from your account. You should check with your insurer to see if this happens automatically.

If you’re not happy with your renewal premium, it’s time for you to start comparison shopping. By using an online rate tool, you can see what you’ll pay for coverage through the competitors. Enter your information in the form and find a new plan in a matter of minutes. Enter your zip code in our FREE tool below to compare car insurance rates now!