Can I extend my car insurance for a month?

Car insurance renewal for one month is not offered by most insurance companies. However, the right payment plan with your company may save you from waiting for a 5 or 11-month refund after renewing.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 16, 2021

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Here's what you need to know...

  • Traditional car insurance comes in 6 or 12-month terms
  • Premiums are fixed and guaranteed for the entire term after issuance
  • At the end of the term, policyholders will be sent a renewal or non-renewal notice

Life is full of the unexpected. Sometimes, you find a better deal on comprehensive coverage mid-term. Other times, people move across the country or to different countries. They make other changes that make it necessary to change their auto coverage, and this is okay.

Car insurance companies sell policies in 6 or 12 month terms. Some companies sell temporary coverage, but it’s usually at a higher per day cost. An example would be the collision coverage your rental car company to supplement your own. Locking you into a policy for a longer period gives your insurance company some protection. It also protects you from insurance rates that could change at any time due to your driving record or other factors. They cannot raise your rates until renewal.

Fortunately, you can typically cancel your insurance at any time and extend your policy if you qualify after a new underwriting phase. Law requires insurance companies to follow certain rules and give you a set amount back based on where you are in your term even on a six-month policy. You’re entitled to any unused portion of your policy within certain limits depending on who cancelled and how your policy was cancelled.

If you’ve purchased an insurance policy, the declaration’s page that declares what’s covered and what limits you’ve selected will show exactly when the term ends.

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Why do insurance companies offer only 6-month or 12-month terms?

You might be wondering just why auto insurance companies would offer just one term option to consumers who are buying coverage. What’s so special about a 6-month or 12-month term?

After all, one consumer might need only 5 months of insurance whereas another might need 13 months. Unfortunately, offering such a personalized option for customers to bind coverage will cost the insurer more money. A year is already a set term many people are used to in their everyday lives. In some cases, 6-month insurance quotes make it easier for insurers to adjust collision coverage rates as they deem necessary. It also makes it easier for insured drivers to pay their entire policy eliminating the need for costly payment plans.

While some of the larger insurers with high customer satisfaction ratings still offer annual policies, a majority of insurers will sell only 6-month plans because it offers a certain balance between security and flexibility.

With a 6-month period, the insurer is free to reassess risk 6 months earlier than they would for a 12-month policy.

If you’ve had a loss or you’ve been cited for a moving violation, the company can surcharge your rates sooner.

It’s essentially less of a commitment, which means that the company can let go of riskier clients or charge higher premiums to justify keeping them. Even though you can cancel or switch at any time, most customers won’t make the effort when given a default option (including auto renewals).

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What happens when your auto policy renews?

Regardless of the term you choose, it’s important to understand how a renewal works. Most companies will start to review your policy and look for errors and changes in risk about 45 days before your term ends. Keep in mind, there are benefits to not being on a short-term car insurance plan. For one thing, you automatically get lower rates with a longer policy. For another, you’re protected from insurance companies raising your rates mid-term. When they auto renew, it’s cheaper for them to rely on the information they already have. So many don’t run your auto record every time. You can enjoy greater loyalty discounts each time you auto-renew, though.

Keep in mind, if an insurance company has a reason to stop renewal or cancel the policy, they may start the process around renewal time. They’re required to give you a set amount of notice based partly on your state. Your insurance agent may be able to help you shop for a new policy if this happens. You should also make sure you understand the rules.

During the underwriting review, the company will collect your information and may call you for bits of information that’s missing.

All of this will be used to determine if you’re more of a risk now than you were when you applied last term.

Some of the things the underwriter will want to know include:

  • How the vehicle is used
  • How often it’s driven
  • Who drives the car
  • How many drivers have access to the car
  • Claims that have been filed since the last term
  • Moving violation convictions for drivers in the household
  • Odometer reading of the car

Once all of the information is gathered and the underwriter can get a good glimpse at the big picture, new rates will be calculated.

If it’s found that the new risk doesn’t meet eligibility requirements, it’s possible that the company could set up what’s called a non-renewal.

This means that the company has made the decision to end their relationship with your household and will give you until your renewal date to find other coverage.

Some of the most common reasons for non-renewal include:

  • DUI conviction
  • Suspended or revoked license
  • Accidents resulting in injury or death
  • A combination of accidents and moving violations
  • A new high-risk driver has been added to the household

If your policy can’t be renewed, you won’t be able to extend your coverage for the additional month that you need coverage.

If, however, you do qualify for your renewal, you’ll receive your new insurance bill for renewal in the mail about 30 days before it’s due.

How can you set up your renewal for just a month?

You can’t just call your insurer and tell them that you only want your renewal to last for a month. Instead, you’ll need to set up the right payment plan so that you’re not left waiting for a full 5 month or 11-month refund. Then you’ll need to call and notify them a little while before you’re ready to cancel the policy. Again, the exact rules can vary state to state.

The best way to go about extending your term for a month is to pay for a month’s worth of premiums when your renewal is scheduled.

If you currently are billed for the entire term, you can call your agent to set up a payment plan with most carriers. You should not make this a common practice, though. Each insurer asks how long you’ve been with your last insurance company. So you could be setting yourself up for higher rates with your new insurance provider. Depending on the circumstances, you could also accrue cancellation fees.

If you have an automatic draft set up on your account, make sure that you cancel this after your first payment is made so that you’re not charged again.

When it’s official that you don’t need coverage, you can submit your cancelation request and then you won’t have to worry about applying for a new plan.

When should you consider getting short-term insurance?

If you don’t qualify for renewal or you’re not happy with the new rates you’ve been offered, an alternative to renewing would be to purchase a new short-term plan.

Temporary policies are quick and easy to buy, but you’ll only be able to buy liability and medical payments. If you want physical damage coverage for a specific car, you’ll need a traditional policy.

Now that you know what to do, it’s time to find the most affordable solution. If you’re curious to find out if your renewal rates are competitive, consider shopping around and comparing the premiums for the same amount of coverage.

You can easily shop around by using an online comparison shopping tool that will show you multiple rates all at once.

After you review these instant quotes, see which presents the most value and find out if you can choose a monthly payment plan.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

References:

  1. https://www.thebalance.com/can-i-cancel-car-insurance-anytime-527400
  2. https://www.thebalance.com/the-importance-of-the-declaration-page-527411
  3. https://www.iii.org/article/is-there-a-difference-between-cancellation-and-nonrenewal
  4. https://www.wvinsurance.gov/consumerservices/Consumer-Services/Non-Renewals
  5. https://www.thebalance.com/temporary-car-insurance-what-are-the-options-2645566

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