July 29, 2010

Why Insurance Companies Offer 6 Month Policies

Insurance companies go into the business of auto insurance quotes because it is lucrative. There is a lot of money to be made in providing drivers with auto insurance, and an insurance company's success has everything to do with how well they assess and leverage risk against strategic investment. When seeking an auto insurance quote, potential policyholders will note that some insurers will offer only twelve month policy, and other insurers will offer twelve month or six month policies. What is the reason for the annual and bi-annual policy option? Understanding your potential risks and rewards for purchasing a six versus a twelve month policy is the key to picking the policy that is right for you and your family.

Understanding the type of clientele that a particular insurance company caters to will go a long way to understanding why they may opt to offer two levels of options. For insurance companies who cater to a higher level clientele who generally maintain a good to great driving record, it is more advantageous for the insurer to offer only a twelve month policy. They stand to gain little for being able to renew the policy mid-year. For insurance companies who cater to a clientele who is more prone overall to have auto incidents and accidents, it may work out heavily in the insurance company's favor to be able to renew policies and hike rates every six months. Insurers also give themselves the option to drop extremely high risk policyholders twice per year with a six month policy option.

It is helpful when evaluating costs and risks to gather six and twelve month auto insurance quotes from several different insurance providers. In this way you are able to also investigate whether there may be significant premium discounts for purchasing a shorter or longer term policy. If you are a driver who has an excellent record, and are willing to take a driver safety course on top of that, you could wind up with extremely affordable premiums on a six month policy. There is also a consumer benefit to choosing an auto insurance quote for a shorter term period. It is the consumer's chance to evaluate the insurer and gives you an easy out should you decide you are unhappy with the quality of benefits or the customer service.

When it comes to understanding why an insurance company would elect to offer both a six and a twelve month option for purchasing an auto insurance policy, it comes down to three factors-risk, return, and reevaluation potential. As you research auto insurance quotes, you should do your own independent assessment in each category and choose the policy that is best for you.