Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 14, 2021

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In a nutshell...

There’s no way to buy an auto insurance policy that will last from the moment that you buy a car until the moment that you sell it.

It’d be nice to be able to budget to pay the same premiums each and every month for as long as you’re a vehicle owner, but this simply isn’t the way that auto insurance works. If it was, it’d be difficult for insurance companies to make any money.

To protect companies from taking on too much risk, insurance contracts are sold to policyholders in terms. The term is the period of time that the premiums will be guaranteed.

It’s also how long the insurer will provide coverage before your factors are reviewed. If your policy is up to renew and need coverage for a month, let’s discuss what you need to know.

If you’re looking to get better insurance rates, start comparison shopping by entering your ZIP code above!

What is an auto insurance term?


Auto insurance policies are indemnity contracts that last for either six months or 12 months at a time.

The period of time that the policy lasts is called the policy term. It’s how long the insurer is obligated to provide coverage and also how long the rating class will stay the same.

Many carriers will call the term the policy period.

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How does selling insurance in terms protect the insurer?

Being in business selling indemnity contracts can be a risky business.

Carriers must collect enough money from their customers to cover claims when other clients have losses and they need to be indemnified. Premiums are constantly changing because risk changes and expenses change.

If the contract had no end date, the carrier would be obligated to charge the same premiums for as long as the customer owned their car.

This means that the company would never be able to review records and make the decision to end a policy or change the client’s rates. When insurance is sold in terms, it protects the insurer from this happening.

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How do terms protect the customer?

The insurer isn’t the only one who benefits from auto insurance terms. The client can also benefit from the protections that are afforded to policyholders when a term takes effect. One of the biggest benefits to the client is that

One of the biggest benefits to the client is that premiums can’t change during the term unless you make a change to your policy.

As long as you’re making your premium payments and you’re complying with the terms set under your contract, you know that you’ll have insurance up until at least the expiration date of the term.

If you want to switch carriers, you can cancel the policy early or you can wait until the renewal date.

What is a renewal and when is it processed?


A renewal is a document that shows how much your existing policy will cost once the term expires and you enter into a new policy period.

Before a carrier can decide how much to charge you in the future, the will have to have a representative run reports to decide if your rating class should change. If there are new tickets or accidents, you’ll probably pay a higher rate.

Most of the renewal processing is done about 30 to 45 days before the period is going to end.

Once all of the reports are done and the underwriter gets the answers that are needed from you, you’ll get a new declarations page and a new invoice.

If the company doesn’t want to continue the relationship with the client, non-renewal documents will be sent in the mail.

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How do you extend the term for just a month?


As long as you get a notice in the mail offering you the option to renew, you can extend the term for weeks or months.

You can’t ever anticipate when exactly you’ll need your policy to cancel. You might be planning to relocate or planning to sell your car in the near future, but you’ll still need coverage until everything is done.

To extend your current policy to last for another few weeks or a month, you’ll have to accept the renewal premiums and make a payment. If you’re the type of consumer who likes to pay policies in full, steer clear of doing this.

Instead, set up a monthly payment plan where you can pay in installments.

Then make at least the first month’s payment to keep the coverage going.

Always look over the renewal documents to see how much you’re paying for the next term. If you feel like your rates have gone up too much, it might be better to buy a new policy for the next month instead of extending your policy.

Get auto insurance quotes by shopping online and do the math to see how much you’ll pay for a month.

Start comparison shopping today by using our FREE online quote tool! Enter your ZIP code below to get the best auto insurance rates!