Many auto insurance carriers offer the option to purchase policies in 3, 6, and 12 month increments. Although, some insures may offer policies on a month to month basis, where the actual contract is only one month at a time. Each type of policy has its benefits and downsides. It is entirely dependent on the insured’s specific situation, as to which type of policy is best suited. The most common types of auto insurance policies are 6 and 12 month terms. These policies renew every 6 or 12 months and typically have a cancellation fee associated with ending the policy before the end of term. These policies are great for anyone who may have a clean record, because as long as they are in term, their rates can not increase due to violations or accidents.
The only time the insured may be up-rated for these types of situations is upon renewal, when the contract renews. Insurance policies with longer terms are also great if the client wants to pay in full for the full year. Insured’s with clean driving records most typically purchase auto insurance with a longer term, 6 or 12 months, in order to lock in their low insurance rates. Three month policies are good for anyone who might have a driving violation that will be falling off of their driving record in the near future. With a shorter term these auto insurance policy holders will have the option of changing companies when their driving record has lost a violation, without having to pay a cancellation fee.
In addition to this, they would be locked into a price until their current term expires. One month terms, a month to month policy, are a dying line in today’s market. These month to month policies create problems with insurance cards and pose a large risk for insurance fraud. Many times these policies are purchased in States with mandatory auto insurance laws, such as California. People purchase one month policies in order to obtain proof of insurance, when they in fact have no intention of maintaining auto insurance. Most agents and brokers will not offer this coverage unless it is specifically requested. It is up to the agent involved to determine if the policy should be written on a one month term. The agent might question the reasoning behind the request. Odds are a person will not ever need one of these policies.