A Yearly Auto Insurance Policy
Consumers usually choose between a semi-annual or yearly auto insurance policy. The average rates for auto insurance in the U.S. are currently around $1,416/yr, or $118/mo. While most insurers prefer semi-annual policies as it allows them to reassess rates regularly, an annual auto insurance policy is usually better for the consumer. If a driver gets a ticket or is in an accident, the driver's rates won't increase until the next yearly auto insurance renewal.
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UPDATED: Oct 25, 2021
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- There are many factors when it comes to managing your car insurance policy and buying auto insurance for a year
- Auto policies are sold in terms because the insurer and the policyholder are entering into an insuring agreement
- Insurance is an indemnity contract, and selling products in a term protects the carrier from changing risk profiles
- Consumers usually have the option to choose between semi-annual and annual car insurance policy terms
- Buying a yearly auto insurance policy will benefit you because your rates can’t change for an entire year
Auto insurance is one of those products that you have to buy. Since it’s mandatory, many people just rush through the buying process to get it over as quickly as possible.
If you understand what you’re buying, there’s nothing wrong with getting instant auto quotes so that you can find the right carrier and the right coverage at a good price.
The problems arise when you buy cheap auto insurance without really familiarizing yourself with the product.
Like most people, you understand that your annual auto insurance will help you pay for certain things when you have an accident, but there’s more to purchasing auto insurance for a year than that.
Enter your ZIP code above to compare yearly auto insurance policy rates from top companies in your area.
Buying Yearly Auto Insurance
All standard vehicle insurance policies for compact cars, sedans, trucks, and minivans are sold in terms. The term is a policy period that lasts from the effective date to the expiration date that’s found on your paperwork.
While you would think policies could be more customizable, standard carriers only offer policyholders one or two-term options.
Buying yearly insurance is possible, but it’s not always an option wherever you’re shopping.
As you’re looking for the right term for you and your family, you’ll find that you can either select a 6-month term or a 12-month term. Some companies will offer both and others will only offer one of the two.
So if you want to know does Geico or Progressive have 12-month policies, visit their websites or call them to find out for sure.
This is why it’s important to assess companies before assessing car insurance quotes and find the best companies.
How much does a yearly auto insurance policy cost?
To see how much prices for an annual auto insurance policy are at major insurers, take a look at the table below.
|Average Annual Auto Insurance Rates By Coverage Level||Average Annual Rates for High Coverage||Average Annual Rates for Low Coverage||Average Annual Rates for Medium Coverage|
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Even though low coverage is the cheapest, we do not reccommend it, as you will have to pay a lot more out of pocket after an accident.
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Purpose of Auto Insurance Terms
It seems odd to sell a product that expires when auto insurance is something that you need indefinitely.
As long as you own a car you’re going to need insurance. For some, owning a car may be short-lived but most Americans have at least two cars in their household.
By selling something like insurance in terms, it creates an inconvenience for the consumer.
As inconvenient as it might be to buy and review insurance every six months to a year, selling this type of contract in terms is a must. The main purpose of setting a term before the policy is sold is to protect both the named insured and the insurer.
When the policy takes effect and is issued, you’re protected from mid-term rate increases.
The insurer is also protected by selling insurance in a semi-annual or annual term. The protection afforded is different in that it relieves the company of the burden of protecting certain households for too long.
Does auto insurance increase every year? Only if your level of risk changes, such as getting a new ticket or crashing a car. Without a term, insurers would be obligated to offer fixed rates indefinitely. If this were the case, the insurer would never be able to reassess risk when risk profiles change.
What happens at the end of a yearly auto insurance term?
After your application is reviewed and the policy is issued, you’ll be comfortable in knowing that your rates will remain the same unless you choose to change the property, drivers, or coverage limits.
When the policy expires, it doesn’t mean that you can’t stay with your carrier. Insurers have to decide if you’re a good risk by running a renewal.
What is auto insurance renewal?
Renewal is a document that says how much you’ll pay if you renew your yearly policy to buy another year’s worth of coverage at a new rate. When will I get my auto insurance renewal?
The renewal is run by the insurer just about 45 days before the policy will expire.
Since the state says that all carriers have to notify their customers of non-renewals 30 days before coverage expiration, you can expect either a new rate or a letter of non-renewal in the mail just around a month before the policy ends.
What do underwriters assess when a policy is renewed?
You have to be wondering what carriers are going to be looking at when they are assessing you and your family members.
After all, you were eligible for coverage the first time you purchased your yearly policy so why wouldn’t you be eligible just a year later. Being eligible for one year to the next isn’t guaranteed.
What you might not understand is that a single ticket can really affect your reputation with insurers. A citation could change your rate or lead to a loss of discounts.
If other things in the household change or you have a combination of tickets and accidents, you could be non-renewed. Non-renewal is different than cancellation.
According to the Insurance Information Institute (III), cancellation can occur due to a driver failing to pay a premium, committing fraud, or an expired/revoked driver’s license.
Unlike cancellation, non-renewal can be chosen by either the driver or the insurer, and isn’t always because of a poor driver’s record.
Here’s what underwriters are looking at:
- Each driver’s current motor vehicle reports will be run to look for new citations
- Each driver’s Claims Loss Underwriting Exchange (CLUE) report will be run to look for new chargeable claims reported with other carriers
- The claims data reported by the carrier to assess surcharges when there’s a chargeable claim within the last term
- Drivers in the household who aren’t rated
- Vehicle usage and driving habits
- Credit-based insurance scores and whether or not the score has changed for each named insured
- Reviewing eligibility for multi-line and multi-car discounts to verify you still qualify
These factors will all have an impact on what you pay for yearly auto insurance.
When will a ticket or accident affect my insurance?
If you’re convicted of reckless driving three months into your yearly policy, you’ll have nine more months of surcharge-free premiums.
It’s not until the renewal of the ticket conviction or the date that the claim for an auto accident is settled that a charge for the blemish will be assessed. It will be harder to find cheap car insurance after a ticket or accident, but shopping around for rates can help.
Why Most Auto Insurance Carriers Prefer a Six-Month Policy
As you’re shopping around for insurance with some of the leading players in the marketplace you’ll find that a majority of the big companies sell six-month policies and not yearly ones.
While it seems odd that both are options but finding yearly coverage is more difficult, there’s a reason behind the preference.
Selling six-month contracts to customers benefits the insurance company more than it benefits the policyholder. The more often that the insurer can reassess risk and drop clients, the better.
The carrier can not only drop the unappealing risk, the carrier can also raise rates sooner after a ticket or accident with shorter terms. This means higher rates in half the time.
Why is it worth it to buy a yearly insurance policy instead?
There are still companies that believe in offering longer terms. Offering these longer annual terms may be a tactic used to attract a certain demographic or it may just be a practice that saves the carrier money in underwriting operational costs.
Either way, there are still a select few carriers that have yearly insurance.
If you’re getting some instant quotes to compare premiums, don’t let the appearance of a six-month rate attract you when you compare six-month vs 12-month car insurance policies.
The rate for coverage that lasts half as long as a yearly policy is obviously going to look better at first glance. This is before you consider the fact that it’s a semi-annual premium.
Here’s why you should spend time looking for annual policies:
- After the policy is issued, you know what you’ll pay for an entire year so that you can easily budget
- You can pay premiums in full for a whole year so you don’t have to worry about payments
- You can earn a pay-in-full discount
- If you have a ticket or accident, it won’t affect your rate until the end of the annual term
- You don’t have to review renewals every six months
You don’t have to shop around as much when you have a policy that lasts for a year. When it is time to shop, make your chore easier by using the Internet as your quoting tool. Use an online comparison tool now and get instant quotes in minutes.
If you are ready to start shopping for car insurance for a year, enter your ZIP code below to find car insurance rates that work for your budget.