The Pros and Cons of 6-Month and 12-Month Car Insurance Plans

Insurers usually sell car insurance in 6 or 12-month increments, with 6-month policies providing greater flexibility and 12-month policies resulting in less frequent rate revisions. The availability of each coverage period may depend on your insurance provider. For example, 6-month car insurance is standard for GEICO, while 12-month car insurance is standard for Liberty Mutual.^[1][2]

Read below to find out about the advantages and disadvantages of 6 and 12-month auto insurance plans and which length of coverage might be best for you.

Key Takeaways Car insurance companies most commonly offer 6-month policies, which allow you to change your coverage more frequently but could also result in more frequent increases in your premiums. Some auto insurers offer 12-month policies, which forfeit flexibility in exchange for more stable car insurance rates. When your coverage period ends, you will need to renew your policy or find a new policy and your insurance provider will evaluate and potentially raise your rates if you opt to renew. Drivers paid about $98 per month for auto coverage on average in 2020 and, although your insurance carrier will not offer you different rates depending on the length of your coverage period, certain circumstances could make a 6-month or 12-month policy more cost effective. Factors that will have the biggest impact on your car insurance premiums include your driving record, vehicle usage, policy details and personal information.

What Is a 6-Month Car Insurance Policy?

A 6-month car insurance policy provides coverage for half a year at an agreed-upon rate, after which you must renew your policy or shop for coverage elsewhere. This is the most common length of coverage offered by auto insurance companies.

Once the end of your coverage period rolls around every six months, your insurance carrier will reevaluate the risk associated with insuring you and may raise or lower the amount you have to pay for coverage as a result. Keep in mind that auto insurance is required by law in almost every state, so it’s important to make sure that your policy will be renewed or a new policy will begin every six months.

How Much Does a 6-Month Car Insurance Policy Cost?

In 2020, 6-month car insurance plans would have cost around $588 on average since the average cost for liability insurance, comprehensive insurance and collision insurance in the United States was about $98 per month.^[3]

It’s worth noting that some insurance providers offer full pay discounts if you can pay your entire premium at the beginning of your coverage period.^[4] For example, an average driver might be able to buy six months’ worth of coverage from an insurance company that offers a 10% full pay discount for an upfront payment of around $529.20.

Of course, exact car insurance costs vary from person to person and typically depend on factors such as the following:

• Driving record
• Make and model of your vehicle
• Vehicle use and mileage
• Policy details such as your coverage types, coverage limits and deductible
• Insurance and claims history
• Discounts you qualify for
• Location
• Personal factors like your age, gender, credit score, marital status, education and income (although the use of these rating factors is limited in some states)

Pros of 6-Month Car Insurance

The primary benefits of 6-month car insurance policies are their potential savings opportunities and the flexibility they allow for. Since you’re paying for a shorter coverage period, a 6-month policy won’t require as large of a payment if you want to pay it in full up front. As a result, it can be easier to receive a full pay discount if you opt for 6-month car insurance.

In addition, some insurers charge a cancellation fee if you want to terminate your policy before the end of your coverage period.^[5] As a result, having a shorter coverage period allows you to adjust your policy or switch to another insurance provider more often if you so choose without incurring any sort of penalty.

Cons of 6-Month Car Insurance

At the same time, 6-month car insurance policies can occasionally be more expensive depending on your circumstances. Since you need to renew a 6-month policy more often, there is a greater risk of missing your renewal window and letting your car insurance lapse, which could result in an increase in your premiums.

Since your insurance company will evaluate your premiums every time you renew your policy, negative changes to your driving record can impact your auto insurance prices more quickly when you have a 6-month policy. For example, if you get a traffic citation five months into your coverage period, it will cause your premiums to go up after only one month, whereas your premiums wouldn’t increase for another seven months if you had a 12-month policy.

Similarly, the more frequent rate revisions could cause you to lose access to certain discounts more quickly. For example, after you graduate from college, your good student discount could expire sooner if you have a 6-month policy than if you have a 12-month policy.

Who Is a 6-Month Car Insurance Policy Best For?

A 6-month car insurance policy could be beneficial for both someone who wants to experiment with their insurance coverage and someone who expects their rates to stay fairly static.

If you want the freedom to compare quotes from different insurers or adjust your policy details more frequently, 6-month car insurance may be appealing to you since you won’t be locked into paying an established premium for as long of a period of time.

Similarly, if you feel that you only need temporary car insurance, your best option may be to buy a 6-month policy, pay in monthly installments for as long as you need it and then cancel it whenever you no longer need it since most car insurance companies don’t sell coverage for periods of less than six months.

Meanwhile, the primary downside to 6-month auto insurance is how your premiums can fluctuate more rapidly. However, if you have a clean driving record you feel confident you can maintain and there aren’t any discounts attached to your policy you expect to change anytime soon, then your premiums may remain stable over time. As a result, you may be able to enjoy the benefits of 6-month coverage without being weighed down by the potential drawbacks.

What Is a 12-Month Car Insurance Policy?

If you buy a 12-month insurance policy, your coverage will last for a year before you will have to renew it or shop elsewhere. Otherwise, it works the same as a 6-month policy in that you must pay your premiums in order to receive coverage from your insurance carrier in case you are involved in a car accident.

How Much Does a 12-Month Car Insurance Policy Cost?

Insurance companies generally don’t offer different rates for 12-month policies, meaning an average yearlong policy in 2020 would have still cost around $98 per month, which comes out to about $1,176 for the whole year.^[3]

As a result, if your insurance provider offers a 10% full pay discount, you may be able to get a full year of coverage for an upfront payment of around $1,058.40. Otherwise, you could end up paying more for 12-month auto insurance since some companies like GEICO add fees if you pay your premiums in installments.^[1]

Alternatively, if your car insurance goes up naturally over time, you may actually end up paying less with a 12-month policy if you pay in monthly installments and your insurer doesn’t charge installment fees. The below table depicts a scenario where your rates increase slightly every time your policy renews for both a 6-month and 12-month policy. Because it has fewer renewals and therefore fewer rate increases, the 12-month policy ends up costing $90 less over the course of two years.

Monthly Premium	6-Month Policy	12-Month Policy
First six months	$100	$100
Second six months	$110	$100
Third six months	$115	$115
Fourth six months	$120	$115
Overall cost for two years of coverage	$2,670	$2,580

Pros of 12-Month Car Insurance

The biggest advantages associated with 12-month car insurance policies are their convenience and consistency. If you don’t expect your coverage needs to change anytime soon, it can be nice to only have to deal with renewing your policy or shopping around once per year rather than twice per year.

Depending on your driving record, the lower number of rate revisions that come with a 12-month auto insurance policy can also be helpful. For example, you may get to keep paying a lower rate for a longer period of time if you get into an accident or receive a speeding ticket early in your coverage period.

Cons of 12-Month Car Insurance

You could end up paying more for 12-month car insurance since it may be harder to muster an upfront payment for a full year’s worth of coverage in order to get a full pay discount. In addition, a 12-month policy makes it harder to switch insurance providers if you find a better deal elsewhere because you may have to wait longer unless you are willing to pay a cancellation fee.

You also need to consider the fact that 12-month car insurance policies aren’t as common as 6-month policies. As a result, it’s possible that you could struggle to find a 12-month policy that adequately meets your coverage needs.

Who Is a 12-Month Car Insurance Policy Best For?

A 12-month policy is best suited for someone who is financially stable but perhaps a little less stable behind the wheel. If you have enough money saved up to make an annual upfront payment of more than $1,000, then you may be able to enjoy a full pay discount with a 12-month policy while also avoiding the more frequent rate adjustments that can come with a 6-month policy.

You may also find that a 12-month policy is best if you aren’t confident in your ability to maintain a clean driving record.

Since your premiums won’t change as often, it may take longer for a moving violation to drive your insurance prices up, which could save you money in the long run.

How To Get 6-Month and 12-Month Car Insurance

Whether you want 6-month or 12-month insurance, you should obtain quotes from three to five separate auto insurance companies. You will likely need to tell each insurer the age of your car, its make and model and your age, along with providing information like your driving record and driver’s license number. However, this process can become burdensome if you reach out to each insurance carrier individually.

Fortunately, you can take advantage of SmartFinancial’s insurance marketplace platform to make this process easier. By filling out a simple questionnaire about your coverage needs and budget, you can be matched up with auto insurance agents near you who can provide you with the right policy. If you’re interested in receiving a free auto insurance quote, you can get started by typing in your zip code below.