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

UPDATED: Jul 14, 2021

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In a nutshell...

  • Car insurance companies calculate rates based on a complex mixture of an insured person’s driving history, age, marital status, etc
  • The safer you are as a driver, the more money you will make for the insurance company by paying premiums
  • Some car insurance companies will offer one-year insurance terms, while others may renew every three months

When you purchase a car insurance policy, you agree to a pre-determined term for six months.

The premium can be paid in full at the beginning of the term or can be divided into monthly payments.

Regardless of how often you pay, your policy will still renew at the end of the term and depend upon what may have occurred during your policy period; your rates may change.

An insurance company insures against the possibility of an accident or future claim, meaning that they try to take on clients who are unlikely ever to file claims.

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Rate and Policy Factors

If you are a driver at risk for getting into an accident, you will be required to pay higher premiums to compensate for the risk of any potential claims.

Car insurance companies calculate rates based on a complex mixture of an insured person’s driving history, age, marital status, credit score, length of time with the company and several other factors.

Because many of these items may change frequently, an insurance company will continuously review a driver and make necessary changes to a policy.

The process of determining how much money an insured person should pay for premiums is called underwriting, and any insurance company will have an underwriting department dedicated to collecting information about a driver and applying that to policy changes.

There are dozens of factors that may make a difference in an insurance policy such as:

  • If the driver’s marital status changes
  • If the driver is involved in any motor vehicle accidents
  • If the driver receives any traffic citations
  • If the driver is charged with a DUI
  • If another driver is added to the policy
  • If any significant changes have been made to the car, such as adding anti-theft protection
  • If the driver has moved to a new neighborhood

In some cases, rates will decrease from one term to the next. Some car insurance companies even reward customer loyalty by providing discounts to drivers who have been with the company for several years.

If you make any positive changes to your vehicle, such as implementing anti-theft protection, your policy premium will go down.

You will also enjoy a reduction in your insurance rate if you choose to take any supplemental driver’s education courses, such as a defensive driving class.

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Can my car insurance rates go up at renewal time?

Of course, sometimes policies do go up when they renew. This can be due to a claims history if you have reported accidents during the past six months.

It can also be caused by things outside of your control, such as moving to a neighborhood with a high-risk of theft and vandalism.

Because changes can frequently occur in a driver’s living situation and driving record, car insurance companies renew policies frequently.

This allows them to match the policy premiums most closely with what the driver deserves so that prices can stay as reasonable as possible.

Can I buy car insurance with a longer term before renewal?

Some car insurance companies will offer one-year insurance terms, while others may renew every three months. Six-month terms are the most common.

If you pay month-to-month, you may not notice that your term has renewed at all; usually, the renewal automatically carries overall coverage and details from the previous policy term, so you should not have any interruptions in your policy.

If you make any significant changes during your policy term, such as adding a new vehicle or changing your marital status, you can expect those changes to be reflected in the policy when it renews.

If you’re concerned about the possible ramifications of a change, you can always discuss it with your insurance agent or customer service representative before making the difference.

How to save money on car insurance at renewal time?

If you are concerned that you are paying too much for car insurance, renewal time is an excellent opportunity to shop for another insurance company.

Many companies will offer a discount for switching, and some companies rate different underwriting factors differently, meaning that an accident that caused a significant rate increase for one company may not count for as much with another company.

If you do choose to shop for quotes with other insurance companies, be aware that any prospective company will contact your current insurer and speak with the underwriting department to learn about any issues you may have on your policy.

Your new insurance company will know about any claims on your policy, as well as other risk factors. Just changing an insurance provider does not protect you from rate increases due to legitimate risk factors on your plan.

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