Car Insurance Renewal: How Does It Work?

Car Insurance Renewal
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Car insurance renewal is typically a straightforward process. In fact, in most cases, it’ll happen automatically. When your policy is close to expiring, your insurer will send you an updated rate. If you’re enrolled in automatic payments, your insurer will charge that amount to your account and you’ll maintain your coverage.

However, if your rate has gone up, your coverage needs have changed or you’re looking for savings, you should consider your options.

What is my car insurance premium?

A car insurance premium is the cost of your auto insurance policy and is sometimes called an insurance rate. Your total premium amount may cover you for six months or a year, depending on the policy length options your company offers, but you can typically pay your premium quarterly or monthly rather than as a lump sum.

The national average premium for a full coverage car insurance policy in 2023 is $2,014 per year, according to Bankrate’s study of average rates from Quadrant Information Services. The minimum coverage average is $622 per year.

An insurance premium is what keeps your policy in force. As long as you continue paying the auto insurance premiums on time and meet the terms of your policy, your insurance company ensures financial protection for you and your vehicle in the event of a covered loss. If you stop paying the premium, the insurer has the right to cancel your policy after a certain period.

Once your car insurance company cancels your policy, your coverage terminates, which may leave you with a lapse of coverage if you don’t secure other coverage beforehand.

When do you pay a car insurance premium?

How often do you pay for car insurance? It depends. When it comes to payment plans, your company probably has several options. You can usually pay your premium in full or in installments, usually monthly, quarterly or semi-annual, depending on the length of the policy term. You typically get the best rate on insurance when you pay in full and avoid installment and processing fees.

There are a few things you might want to consider before choosing a payment plan. Although you may save money by paying your premium in full, you may want to consider installments if this lump sum will cause you financial hardship.

Most companies will allow you to change your payment plan in the middle of your policy term, too. Perhaps you’d like to start your policy on a monthly payment plan, but later on, find that paying in full makes more sense. If you have specific questions regarding your payment plan options, you may find it helpful to contact your insurance agent.

Car insurance renewal: How to renew a car insurance policy

Auto insurance policy periods are usually about six or 12 months. Once you near the end of your current policy term, you’ll receive an email or a letter from your insurer that will include the terms it will offer you to renew your policy. Some specifics around your coverage may change, and your car insurance rate will likely increase. Your rate or other terms may change, so look over your new ID cards and read the new policy documents before the renewal date.

Once you receive that information, you’ll have two options: Renew your current policy with the updated rate or shop for a new one.

Chances are you won’t need to take any action to renew your policy. With most providers, car insurance automatically renews. If you’re happy with your current insurer and want to stick with it, all you’ll need to do is review your updated rate and meet the deadline for your first payment under the new policy. If you’re already enrolled in automatic payments, you’re good to go.

But if you’d like to ensure you’re getting the best deal for your coverage, shop around and compare quotes from other companies before you commit to your current insurer’s new rate.

Car insurance renewal: Shopping for car insurance

If you decide not to renew your policy, you’ll need to shop for new car insurance online or with the help of an agent or broker. When you’re researching, think about how much auto insurance you need.

To give yourself thorough car insurance coverage that protects your car and your wallet, consider buying a full-coverage policy if you own a newer car. Full-coverage auto insurance policies usually include these:

  • Liability car insurance: Bodily injury liability coverage pays for the medical costs of the people injured in an accident when you’re at fault. Property damage liability covers the damage you caused to someone else’s property.
  • Comprehensive car insurance: This covers your car’s damages from environmental conditions such as fire, fallen trees, theft, vandalism and natural disasters. 
  • Collision car insurance: This covers damages to your vehicle that come from road accidents or collisions with stationary objects.
  • Underinsured/uninsured motorist coverage: This takes care of your injuries and vehicle damages when you’re the victim of a hit-and-run or an auto accident caused by a driver with little or no auto insurance.

Liability coverage (or third-party car insurance) is required in most states. Some states also require underinsured/uninsured motorist coverage, personal injury protection (PIP insurance) or medical payments coverage (MedPay).

What happens if I don’t renew my policy?

If your car policy expires, you might still be able to renew it. Do this as soon as possible, because a lapse in coverage can cause you to have increased rates once you’re insured again.

If you get into a car accident while your coverage is lapsed and you injure someone or damage property, you’ll have to pay any expenses out of pocket. The same applies if your car is damaged by a natural calamity like a flood or another situation out of your control. Your insurance company might be willing to reinstate your policy after you let your coverage lapse, but you’ll likely be charged a penalty. If you can’t renew, buy a new policy.

A lapse in auto insurance can also cost you when you decide to get a new policy. If insurers see a lapse on your record, they’ll almost certainly offer you a higher quote when you shop for a new car insurance policy. That’s because insurers see drivers with an insurance lapse as riskier to insure.

Can my insurer refuse to renew my policy?

An auto insurance company can cancel or refuse to renew your policy as a consequence of things like driving record issues or missed insurance payments.

Here is the difference between a policy cancellation and nonrenewal.


Cancellation can put an end to your current insurance policy at any time. But after 60 days have passed since the start of your policy, your auto insurance provider cannot end your coverage for just any reason. Your policy could be canceled if:

  • You receive a DUI conviction.
  • You have your driver’s license revoked or suspended.
  • You make several late payments or fail to pay your insurance premium.
  • You commit insurance fraud.

If you cancel your car insurance, you’ll usually get a prorated refund for any time you’ve paid ahead. But depending on your provider, you should be prepared for a short-rate cancellation. This type of cancellation discourages a customer from ending their policy before the expiration date because it entitles the insurance company to keep a greater percentage of the unearned premium amount.


Nonrenewal happens when your insurer decides against renewing your policy at the end of the coverage term. The company has to give advance notice and explain why it is not renewing. A nonrenewal can occur if:

  • You had multiple accidents in the past three years, especially if you were at fault.
  • You filed too many insurance claims.
  • Your insurer decided to offer fewer policies in your area.
  • Your insurer stopped offering the type of insurance you had purchased.

If you’ve missed payments, the company may only have to give you 10 to 20 days’ notice for nonrenewal. For circumstances out of your control, you’ll typically get at least 30 days’ notice. The amount of time required for notice of nonrenewal varies by state.

How to decline to renew your car insurance policy

To opt out of renewing your car insurance policy, follow these steps:

  1. To avoid a lapse in coverage, buy a new policy that takes effect one or two days before your current policy expires.
  2. Contact your current insurance provider to cancel.
  3. Confirm that the policy will expire when your current term ends. 
  4. Get confirmation of the cancellation in writing to protect yourself in case you get charged for a new term.

Car insurance renewal: When should you not renew your policy?

Though you can switch car insurance companies at any point, the policy renewal period can be a good time to do it. Here are some reasons to consider getting car insurance from a different provider:

  • Your premium has increased.
  • You want coverage your company doesn’t offer.
  • Your credit has improved.
  • You’re unhappy with your current provider’s customer service.
  • You want discounts your insurance company doesn’t offer.

Before switching, check with your insurer to see what it can do for you. If the company doesn’t offer good enough coverage or rates, find another provider that’s willing to work with you.

Why car insurance rates go up

Your premium is determined by factors like the type of car you drive and the types of coverage you have. Premiums tend to increase if you’ve been involved in a car accident or gotten several traffic violations. Your rate may also go up if you’ve done any of the following:

  • Moved to a new ZIP code
  • Driven more frequently
  • Turned 55 years old
  • Gotten divorced
  • Bought a newer car
  • Added a young driver to your policy

While you can pay your full premium every six or 12 months, some insurers offer monthly payment plans. With increasing insurance premiums, you’ll benefit most if you pay yours all upfront. Installment plans create more work for insurance companies, so some reward you with a discount when you pay off your premium all at once. This could eliminate administrative fees and surcharges on your bill.

Even if you have a great driving record and haven’t made any changes to your policy, your rate could increase when you renew. This might be a great time to get quotes from other insurance carriers. But if you’re happy with the rate, just keep paying your insurance premium on time and in full through your credit card, debit card or other form of payment.

Car insurance renewal: How to lower car insurance premiums

Higher rates are the main reasons drivers don’t renew their car insurance policies. You may be able to reduce your car insurance premium if you choose to renew your policy. Along with paying your premium in full, you can lower your coverage costs by taking advantage of your company’s car insurance discounts.

You can also save money on your auto insurance by taking these steps:

  • Shopping around for a better rate
  • Getting a policy with a company that offers accident forgiveness for free
  • Setting a high deductible for car insurance claims
  • Dropping nonessential coverage
  • Reducing coverage if you have an older car
  • Bundling your insurance policies
  • Taking a driver safety class
  • Building or maintaining good credit
  • Earning a no-claims bonus (NCB) by avoiding claims in the latest policy term

Telematics insurance may also lower your premium. This usage-based coverage monitors your driving habits and rewards good habits with a discounted premium. However, some companies’ usage-based programs can raise rates for people who practice unsafe driving behaviors.


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