Should I buy a 12 month auto insurance policy or a 6 month auto insurance policy?

We have been asked many, many (many) times if there are substantial benefits to purchasing a 12 month auto insurance policy at once -vs- a 6 month policy. There can be certain advantages for each policy in either 6 month or 12 month increments as car insurance rates can change depending on several different factors, including time, so let’s get to the bottom of this right here!

Advantages to purchasing a 12-month, paid-in-full policy

  • Your insurance rate will be “locked in” and cannot change (in 2013, car insurance rates increased nationwide by $153*)
  • One single bill for the entire year
  • You will not forget to pay mid-way through the year
  • If you receive an infraction mid-way through the 12 month period, your rate won’t change during that time period. It may if you were paying every 6 months
  • By paying all at once, you will likely avoid “processing fees” that your insurer must pay when charging your credit card 1x/month (that’s 12 separate transactions they have to run every year vs. just one).

Advantages to purchasing a 6-month, paid-in-full policy

  • If you had an infraction that is due to be taken off your record within a year, your second 6-month premium may be less than the first 6-month premium
  • Provides an opportunity to evaluate your car insurance needs. Perhaps you can find a lower rate from another provider during those first 6 months
  • If you don’t have all of the money for a full year’s premium, splitting it up into a payment every 6 months is, well… better!
  • Again, if you pay only twice a year, you will likely avoid “processing fees” that your insurer must pay when charging your credit card 1x/month

Advantages to paying every month (Usually only applicable if you have good credit and are considered “low risk”)

  • Least amount of money out of pocket for each pay period e.g., $120 month vs $1200 all at once for 12 months (but it will cost more over the policy term)
  • It may be easier to “switch” auto insurance companies if you’re paying monthly instead of waiting for a refund on what remains on your 6 month or 12 month payment

From our vantage point, if you’re a good driver and don’t have any infractions, we think it’s wise to buy a 12 month policy. On the other hand, if your driving record is due to become “clean” within 6 months, we recommend you buy a 6-month policy and evaluate your options after your driving record is normal again.

No matter your personal decision, our vote is to avoid the monthly fees and pay the 6 month or 12 months premium up front. You’ll be glad when you’re not getting charged a processing fee that adds up over time. For more information about auto insurance and home insurance rates, give us a call at 1-800-258-5101

 

*Source: http://www.propertycasualty360.com/2013/06/24/jd-power-2013-auto-satisfaction-falters-as-rates-r

2 Comments on "Should I buy a 12 month auto insurance policy or a 6 month auto insurance policy?"

  1. Lloris January 6, 2014 at 1:02 pm · Reply

    Not only you avoid processing fees and interest charges with full payment but also some companies offer between 5 – 10% discounts for one lump sum payment. Always ask if you would be offered discounts if you pay the full amount.

    Also, not every company offer 12 month policies. If this is the option you like, perhaps you should first check if the company you want to get quotes is offering 12 month policies to avoid wasting time.

  2. Aspet Grigoryan December 5, 2013 at 6:43 pm · Reply

    In most states credit is used by insurance companies to predict the likely hood that you may file and claim and how expensive it may be. So if you think your credit is about to improve for some reason then you want to purchase a six month policy and take advantage of the lower rates at next renewal. This is also true if your credit score is about to drop. In that case you want to purchase a one year plan and lock in the rate as long as possible.

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