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: Apr 14, 2022

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In a nutshell...

  • If you’re buying car insurance, focus on the term to ensure that you have coverage for the right amount of time
  • The longest policy term that you can choose with most car insurance companies is a one-year term
  • You won’t have to worry about rate increases or surcharges for as long as your term is in effect
  • As you compare different policies and premiums, make sure to look for a carrier that you can trust
  • It’s imperative that you shop on a regular basis or you could wind up paying too much for your auto policy

The average person pays $841 per year for auto insurance coverage according to nationwide data. In some states, drivers pay significantly more than in others for their insurance because of claims statistics in the region and the state-mandated requirements.

The best option for you to find a deal is to shop around, no matter where you live.

All insurance policies are sold in terms. If you’re looking to stick to a budget for as long as possible, it’s best for you to secure an annual term as opposed to the alternative option that only lasts half the time.

If you’re looking for a one-year car policy, here’s a guide to help.

If you also want to start comparison shopping today, try our FREE online quote tool and compare three to four policies to find the best auto insurance for you! Enter your zip code above to get started now!

Why are car insurance terms so important?


The car insurance industry is all about risk. Insurance companies offer coverage to clients in exchange for policy premiums. When the policy is issued at a final premium, the rate is guaranteed for the length of the policy term.

The only time rates change is when different rating factors like the vehicle, mileage, usage, and drivers in the home change.

For as long as the term is valid, the rate won’t change and any surcharges for tickets and accidents that you’ve had during the term won’t be added.

A policy term protects the insurer because they are only obligated to extend coverage until the term is over. When the term is up, the renewal will be run, and the insurer will decide if it wants to offer the policyholder a new term.

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Can you cancel your insurance if you don’t need it for a year?

If you can avoid having to pay heightened insurance rates within the next six months, it’s to your advantage to take a longer annual term.

Unfortunately, not everyone knows how long they’ll need their policy.

You could sell your vehicle or move to a new state and have no need for the policy. Luckily, you do have the option to cancel your policy at any time.

How do you apply for an annual car insurance policy?


You have to have auto insurance from the moment that you become the owner of a vehicle. You also have to register the vehicle in your name to legally operate the car.

Since you don’t have much time to find auto insurance, it’s helpful to understand the application process before you’re in a time crunch. Here are the steps you’ll have to take:

  • Decide how much coverage you need
  • Solicit auto insurance quotes and get multiple estimates
  • Choose a policy and an effective date
  • Provide all of your personal, vehicle, and household information by filling out your policy application
  • Submit your application and payment to your agent and the policy will go through underwriting where you’ll receive temporary coverage
  • Review your final paperwork after the 60-day binding period has ended and the policy is issued

Why do you pay more than other drivers that you know?

It’s frustrating to hear that you’re being charged more than other drivers in your family or your circle, but it’s common. You can’t set your budget off of what someone you’re close to pays for coverage.

Insurance premiums are extremely personalized, and there’s no way to compare your rates to what others are paying.

There are so many different rating factors that insurers use to set your rates, and they all play a role in rate calculations. You could have similarities with people you’re close to, but several of your rating factors will be different.

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Here are some of the more significant rating factors used:

  • Vehicle type  The year, make, and model will be used in combination with the vehicle’s ISO rating
  • Driving experience  How long you’ve been licensed affects how likely you are to have a claim
  • Driver’s age  Younger drivers and elderly drivers are more likely to be at-risk of having an accident
  • Occupation  Some professionals pay less than others because of their occupation rating class (nurses, teachers, and pilots are all in a low-risk class)
  • Level of education  Drivers with a college degree are statistically less likely to file claims
  • Credit-based insurance score  Your credit score will be used to calculate your personal insurance score
  • Garaging territory  The zip code where your vehicle is parked overnight can affect your likelihood of filing damage and accident claims
  • Estimated annual mileage  The more that you drive a car, the more exposed you’ll be to loss
  • Vehicle usage  You could be classified as a pleasure, commute or business driver (pleasure drivers pay the least because they drive in less stressful conditions)

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How do you choose an auto insurance company?


Price shouldn’t always be the priority. When you’re entrusting a financial company to protect all of the money you work hard to earn, you need to be sure that the company is honest and stable.

The only way to do this is to check out your options before you even get quotes. Here are some considerations that you need to remember:

  • Financial stability is important  Check the company’s financial stability rating through a consumer protection agency like AM Best to verify the company can manage money and pay claims
  • Licensing must be active  State departments won’t accept your insurance proof if the coverage is provided by a carrier that’s not licensed through the state
  • Complaint record  Check the national and state database for claims to see if carriers often delay payments or if they have a bad industry reputation
  • Product offerings  Some carriers offer other lines of insurance and special types of policy provisions that provide you with more convenience and better levels of protection

What types of policy provisions should you look for?


As long as you have basic insurance, you’ll be in compliance with the state. Unfortunately, many people don’t realize that it’s important to look past the basics.

If you want protection that’s really there when you need it, you should look for standout policy provisions.

Some carriers compete by offering the lowest pricing in the marketplace. Lower prices will get the carrier attention, but they could also put the company at risk.

Instead of undercharging clients at the risk of going insolvent, other insurers offer beneficial provisions that make life easier for their customers when they file claims. Here are some options to look for:

  • Disappearing deductible  As you go years without having a claim, you’ll deductible will drop, but you will still pay the low-rate for a high deductible
  • Accident forgiveness  If you have a clean driving record for an extended period of time, you’ll be forgiven for your first accident and your rates won’t go up
  • Free glass replacement  If you need chip repair or a windshield replacement, you may be able to file a claim without paying your comprehensive deductible

The best way that you can compare premiums when you’ve compared carriers and products is to shop around online.

Don’t contact every company you like directly. Instead, you can save time and solicit multiple quotes instantly by using a comparison shopping tool.

Try our FREE online quote tool and start comparison shopping today for better auto insurance rates! Enter your ZIP code below to compare three to four policies all at one time!