There’s a lot to customize when you’re buying car insurance, from the types of coverage you want, to how high you set your limits to how long you want your policy to last. How long your car insurance policy will last depends on your provider, but most auto insurance companies offer coverage either in six- or 12-month policy terms.
Your coverage is locked-in for the entirety of your policy’s term, so if you have an accident or a driving violation shortly after your policy is put in force, then your insurer won’t raise your rates until after the term is up. As long as you make all your payments and don’t violate the terms of your contract, you’ll be covered until your term ends.
You can find out how long your term is by reviewing the effective date and expiration date of the declarations page of your policy.
How long is a car insurance contract?
Your policy term is the length of time your auto insurance policy is in-force, meaning valid. Most auto insurance companies set policy terms at either six months or a year. During your six- or 12-month term, your insurance company won’t raise your rates after an accident, but your rates may go up at renewal.
Most insurers will automatically renew your policy once the term is up (sometimes with a rate increase), which is why it’s often a good idea to shop around for other coverage options around the time your policy is set to renew. If you’ve filed multiple claims or been a reckless driver, your car insurance may decline to renew your policy, meaning you must shop around for new coverage.
What’s the difference between a six-month and 12-month term?
Most major companies offer coverage in either six-month or 12-month terms, although 6-month terms are more common. The term length is important because it determines how long you’re going to be covered.
Six month policies offer more flexibility because you can shop around more frequently. If your driving record or credit score improve during your policy term, you may see lower rates with your insurer sooner than if you had a 12-month term
Six-month terms mean more opportunities for your insurance company to raise your rates
Car insurance rates tend to go up over time, so a 12-month policy ensures that you’re locked in for a year of coverage before your rates are revised
If your driving record improves, you won't see it reflected in your rates until your term is up
You can either pay your premiums for the entire term upfront and take advantage of any pain-in-full discount your company offers, or you can pay your premium in monthly increments, which typically costs more over time. Another note about premiums — when you’re comparing quotes during the shopping process, make sure you’re looking at the term lengths. A 12-month policy will have a much higher total premium than a six-month policy, but that’s because it’s offering you coverage for double the amount of time.
Short-term car insurance
Car insurance companies don’t offer coverage in increments shorter than six months. If you’re renting or borrowing a car you don’t own, there are other ways to make sure you’re covered by car insurance without buying a six-month policy.
If you’re borrowing a car from a friend or taking turns behind the wheel during a road trip, you’ll be covered under the car owner’s policy, even if they’re not in the car with you. If you’re renting a car, your credit card may include car insurance coverage, or you can purchase car insurance directly from the rental car company.
If you frequently borrow or rent cars and you’re concerned about being adequately protected, you can look into a non-owner policy. Non-owner car insurance is typically limited to liability coverage, which covers your financial liability if you damage someone else’s property or injure someone in an accident.
➞ Learn more about short-term car insurance
Can I get a refund on car insurance if I cancel early?
If you cancel your car insurance policy before your six- or 12-month term is up, and you paid your policy premiums in-full at the start of the term, you’ll typically receive a refund for the remainder of your policy. However there are usually fees for canceling a car insurance policy before the term is up, so any refund you receive will be subject to those fees.
Remember, car insurance is required by law in almost every U.S. state, so you should only cancel your car insurance policy if you either no longer have a car or have another policy in place to cover you as soon as your old one is canceled.
➞ Learn more about car insurance refunds