Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 13, 2021

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For some of us, making the commitment to pay for car insurance for six or 12 months at a time can be a little too much to bear.

Additionally, there are those of us who may only need car insurance for a short period of time for one reason or another.

The good news is many auto insurance companies offer a shorter policy term than the standard six-month policy.

Typically, these short term or temporary car insurance policies are made available through non-standard auto insurance carriers and sold direct to the consumer, though you can also grab one with an independent insurance agent.

Additionally, some insurance disruptors have entered the space as well, such as Metromile, where you pay for car insurance per mile driven.

Generally, the coverage options usually include lower liability limits, including state mandatory minimum car insurance and physical damage coverage.

So what are the shortest terms available?

1-Month Insurance Policy: This is the shortest-term car insurance policy available to you.

Typically, this policy is paid in full up front. Depending on which insurer you purchase your policy from, you may have between 15 and 30 days to make another payment and purchase another month’s worth of insurance.

Your policy will simply cancel if you don’t fork over another monthly premium.

3-Month Insurance Policy: Very similar to the 1-month insurance policy, you simply pay for three months at a time.

Stop paying and your policy cancels. Often times, these policies need to be paid in full, but some insurers will allow you to make one down payment and one or two other payments.

Your agent will make you aware of your payment options…just ask.

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Are short-term car insurance policies a good idea?

Major insurance companies are keenly aware of their client base and closely monitor our behavior to determine how best to make their money…no different than any other corporation.

Monthly insurance policies, by nature, do not make much money from an insurance premium standpoint.

The more times an insurer or agent has to “touch” a policy, which can be as much as 12 times per year for monthly auto, the less money is made.

This is where the fees come in!

Car owners might want to buy short-term car insurance policy if they’re in the process of switching coverage from one insurer to another, or they’ve already dropped their previous coverage. Moreover, temporary insurance coverage is good if you’re lending your car to a relative, friend or someone else who is not included in your regular car insurance policy. Moreover, temporary insurance policies are sold when the driver is selling the car and needs to cover the vehicle when it’s being driven by potential buyers who are not covered in the existing policy.

Insurance providers don’t like this type of coverage because the risk of offering temporary car coverage outweighs the benefits of selling this kind of coverage.Other alternatives include non-owner car insurance if you don’t own a car but need coverage; and cancellation of a standard car insurance policy when you no longer need the coverage.

What are the short-term car insurance fees?

Month-to-month auto insurance is basically a fee-based business.

Every month you are required to pay another policy fee, which is often “fully earned,” meaning there is no refund if the policy cancels.

If the policy fee is $50, and your purchased six one-month policies throughout the year, you would be paying $300 in policy fees.

Purchasing one 6-month policy may generate only one $50 fee.

The money saved in fees could go toward buying another six-month policy. There are also discounts available for keeping continuous coverage.

Think of it as shopping at Costco or Sam’s Club. If you are willing to buy a year’s worth of anything, in this case car insurance, you’re going to get a better deal.

I recommend re-budgeting your finances to determine if you can purchase longer-term auto insurance.

Of course, these policies are available because there are those of us who need them.

At the end of the day, it’s better to pay a little more for insurance coverage than have none at all.

Getting caught driving with no insurance can result in your license being suspended or even worse, revoked.

If caught with no car insurance, most states will require you to obtain an SR22 filing.

Get car insurance quotes online or contact an independent insurance agent if you are currently uninsured or interested in monthly auto insurance.

This is the best way to ensure you are getting the coverage you need at a price that fits your budget.