How Often Do You Want to Be Re-Rated?

Auto policies commonly come in six-month or twelve-month terms, and the choice is presented as a billing detail. It is not. The term length determines how frequently your price can be recalculated — which cuts one way when your record is improving and the other way when it is not.

What actually happens at the end of a term

The company re-rates you: it re-reads your record, applies its current filed rates, and produces a renewal offer. Between terms, your rate is generally fixed except for changes you make. So the term length is the interval between recalculations, nothing more mysterious than that.

For the rules across California, see the Auto World Insurance Services page on the auto insurance glossary.

When a shorter term helps you

• A violation is about to age out of a look-back window.
• You are early in your license history and the experience factor is still improving noticeably.
• You are about to cross the three-year mark for good driver qualification.

In all three, being re-rated sooner is being re-rated better.

When a longer term helps you

• Something recently landed on your record and the market is unfavourable right now.
• Rates in general are rising and you would rather sit still through it.
• You simply want fewer renewal decisions in your year.

The comparison mistake this creates

A six-month premium and a twelve-month premium are not comparable numbers, and people compare them anyway — usually when shopping quickly. Always convert to the same basis before deciding anything. It sounds obvious written down; it is one of the more common ways a quote comparison goes wrong in practice.

What it does not change

Term length is not a discount and it is not a rate. It does not change your factors, and choosing one over the other does not make a company like you more. It changes the timing of recalculation, and the payment schedule that goes with it.

What we suggest

If your situation is improving, take the shorter term and re-shop at each renewal. If it is not, take the longer one and use the time. Either way, put a reminder in your phone a month before the renewal date — that reminder is worth more than the choice of term.