Why Do Car Insurance Companies Have 6 Month Policies?
Q: Why Do Car Insurance Companies Have 6 Month Policies?
AIS Answer: Not all insurance companies have 6 month terms on their auto insurance policies, but many do. Since insurance companies are in the business of making money, assessing your overall risk and current risk are very important factors.
When an insurance company locks in a rate for a 6 month policy, they have to be as sure as they can be that they will make a profit and not lose money on the transaction. Assessing risk gives them the most accurate picture of their investment.
If during your 6 month auto insurance policy you rack up a few speeding tickets, your rates aren’t affected. However, your DMV information will reviewed when your policy comes up for renewal at the end of the term and your premium may rise. Although, this is a negative example. Sometimes insurance companies will lower rates. If you live in a state like New York or New Jersey that have very high rates, safe drivers are rewarded with lower rates initially and over time when their policies renew and there are no claims or violations (tickets/accidents/etc) that would qualify an increase.
The bottom line is that a 6 month policy allows an insurance company to move relatively quickly on a bad policy. They need to make money and bad drivers, excessive claims, and auto insurance fraud and big reasons to keep their losses under control.
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it’s easier to reevaluate an insurance policy when you have a 6 month term. Otherwise you just end up apaying more.
Are there companies with 12 month insurance policy’s?