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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UPDATED: Oct 14, 2021

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Here's what you need to know...

  • Auto insurance policies last for either a 6-month term or a 12-month term
  • The purpose of a term is to keep rates fixed for a specified period. Only after the term can a company reassess risk and raise rates
  • Your policy will automatically renew around 45 days before your policy is up for expiration
  • When the renewal is processed, the underwriter assigned to your file will review your driving record, claims record, and other important factors to determine if you should be placed in a new risk class
  • If you’re not eligible for a car insurance renewal because you’re a high-risk driver, the company must inform you in advance in writing and explain the reason why

When you’re buying a standard auto insurance policy, you get to choose from a long list of coverage options, limits, and deductibles. While there are numerous ways to build an insurance policy, you can only choose between two different term lengths.

It’s your job as a consumer to decide if you’d like a 6-month term or a 12-month term when you’re purchasing a policy. The term of the policy that you pay for is ultimately what determines how often the policy will renew.

If you’re not familiar with the importance of a policy renewal or when it’s processed, now’s the time to learn.

Start comparison shopping today. Enter your zip code in our FREE comparison tool to get started.

What is the significance of your auto insurance term?

An auto insurance term is the policy period when coverage is valid. It might not seem too important when you’re choosing between a 6-month term or an annual one.

There are some advantages to having a longer car insurance term as the consumer. Most of the time companies offer 6-month terms to benefit their best interest and not yours.

The term of your policy doesn’t just tell you how long you have until coverage expires, it also tells you how long you have before your premiums could change. Since you’ll remain in the same risk class until your policy is reevaluated, it can work to your advantage to have a longer term. This is especially true when you have a ticket or accident.

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What does the insurance company do when the policy is up for renewal?

When you apply for insurance, a representative will review your application to ensure that you meet all of the company’s underwriting guidelines.

The period where the company can decide if they’re going to accept or reject a risk is called the underwriting phase.

Once a risk is accepted, the company must keep the risk on the books until the policy renewal.

When the policy renews, the company can reevaluate risk to determine whether to continue the policy. When the risk can be reevaluated, it will go through underwriting again much like the application did when you first applied for coverage. It’s the underwriter’s job to determine if you’ll get a new rate or if your policy should be non-renewed.

What does the company underwrite at renewal?

You might be curious to learn when your rates could change. After all, if you’re loyal to an insurance company you’d hope that they’d do the same. Unfortunately, there are quite a few changes that can lead to rate increases. Some of the changes are beyond your control and others aren’t. Here are things that underwriters look for when reevaluating your renewal:

  • If you have new driving infractions on your driving record
  • If you have any new at-fault claims on your claims history
  • If you have a claim that resulted in injury
  • If you’re still eligible for a Good Driver Discount
  • If your annual mileage estimates were accurate
  • If you’re still eligible for a multi-policy discount
  • If a child in your home is still eligible for the Good Student Discount
  • If an unlisted driver needs to be listed after having a claim
  • If you’re a more experienced driver (for youthful operators)
  • If the company has filed a companywide rate increase and the rates have gone up in your state

When is the renewal processed?

Every company has their own process, but in general, an insurer will start the renewal process about 30 to 45 days before the renewal date.

This renewal depends on the state law that dictates how early an insurer must notify their clients of their new rates. You should call your insurer to ask when the renewal will be processed. Typically the renewal is mailed to you.

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Why is a policy set up for non-renewal?

While it’s not common, some policies will be set for non-renewal. If your policy is non-renewed, this means that the company decided that you were too great of a risk to continue coverage. It could have been for a ticket, an accident, or a combination of household members and claims. Check your notice to find the reason for the non-renewal.

Checking Your Renewal for Errors

If your agent has outdated information, it’s very easy for your renewal to have errors. You should check your renewal each year and look for areas to update.

Your commute may have changed or you may drive less because you bought a new car. Notifying your agent of a change in occupation or vehicle use could save you loads of money in your next term.

If you’re not happy with the new invoice you received, it might be time to consider switching carriers. Sometimes being loyal pays off but there are times where your loyalty can cost you.

If you want to find the best rates, use a rate comparison tool and start shopping. Simply enter your zip code to get quotes from several carriers instantly.