You can save money on insurance just by having a good driving record. You might be able to save even more money if you purchase a 12-month auto insurance plan. Each insurance agency sets its own rates based on its own methodologies. Nonetheless, usually, good drivers can benefit by paying auto insurance upfront annually.
Evolution of Auto Insurance Plans
Auto insurance plans have been around for over a century. The earliest plans provided basic liability coverage if the driver caused property damage or injured someone. Over time more and more features were added to auto insurance coverage, such as protection against theft and fire. By the time cars became mainstream in the roaring twenties, there were various types of comprehensive auto insurance plans available.
As the insurance industry grew, plans became so elaborate, it was convenient to offer options for 6-month or 12-month plans. For decades this choice was common, but in recent years the annual option has become less frequent among several insurers. Massachusetts passed laws in the 1920s for compulsory auto insurance and it took the rest of the nation to catch up by the end of the 1970s.
The average annual cost of auto insurance in America in 2009 was $786, according to the National Association of Insurance Commissioners. By 2018 the average cost had grown to $1056. In that time period, consumer debt rose and most Americans had very little cash in their savings accounts. That’s why it’s become much more difficult for most people to pay upfront cash for 12 months of any type of service.
Why Your Driving Record Matters
Maintaining a good driving record should be a top priority for all motorists. If you have marks on your record, such as a speeding ticket, you may be better off getting a 6-month plan. It will allow you to shop around for better rates, whereas someone with no marks probably gets low auto insurance rates already. Insurance agencies tend to prefer shorter terms because reviewing accounts more often helps boost revenue and sharpen forecasts.
When you combine a spotless driving record with cutting back on travel miles per year, it’s possible to get a very low monthly auto insurance rate. In that scenario, if the payment is only a few hundred dollars, it makes sense to lock in a 12-month payment. The best scenario for low auto insurance rates is working at home, walking to the store and using the car sparingly.
Deciding Which Term Works Best
The 12-month auto insurance plan best suits drivers who have enough cash on hand to pay a large lump sum at once. The advantage is that you lock in a premium, which otherwise could go up in six months. Ask your insurer if you can get a discount on paying upfront cash for annual coverage. While it’s common for insurance companies to avoid talking about discounts in promotions and on their websites, it’s also common for insurers to discuss discounts when asked.
The 6-month plan is a more suitable option for drivers on a tight budget, particularly if you are in the middle of paying off a car loan. If you’re also in the middle of changing your driving habits to improve your insurance rates, the 6-month plan probably works better as well.
Nonetheless, you may feel more secure with a 12-month plan. Getting annual bills over with is often a priority for people who earn enough to pay several big bills at once. A business can benefit from an annual plan if it owns a fleet of vehicles. By always planning bills once a year, there’s less chance of a lapse in coverage.
Every driver must customize their own auto insurance plan based on how much they drive. Contact us at East End Insurance Agency so our insurance experts can share answers to your questions. Whether you have an existing policy or would like to buy a new one, you should know all of the details in your coverage. Let our experts help you get the information you need to make an informed decision.