Month-to-month car insurance: What you need to know

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Car insurance policies typically cover six months or a year, but not every driver needs that much coverage. Snowbirds, college students and those preparing for a move may only need temporary coverage until they get to their new location.

Month-to-month car insurance may seem like the logical answer for these drivers, but if you’ve done a search for “monthly car insurance,” you know these policies are nearly impossible to find.

“Some specialty carriers may offer them, however, they tend to be more expensive,” says Howard Goldberg, vice president of customer service for insurer Plymouth Rock Assurance.

A better option is to make your own temporary coverage by buying a six-month policy and canceling before the term is up.

Keep reading for everything you need to know about month-to-month car insurance and how to find a coverage solution that fits your needs.

What is month-to-month car insurance?

A real month-to-month car insurance policy would let you renew every 30 days, but major insurers don’t sell short-term coverage. Instead, most companies require you to buy at least a six-month policy.

Although it might feel inconvenient if you only need insurance for a short time, having a longer policy can actually work in your favor, according to Steven Cegelka, chief operating officer for Ignition Dealer Services, a company that provides financial solutions to vehicle dealers.

“The issue you’re going to have with a month-to-month policy is that your rate could increase every single month,” he says. With a six- or 12-month policy, your rate is locked in for that period of time.

However, you can create your own “month-to-month” policy by buying a six-month policy, paying monthly and then canceling when you no longer need insurance. You’re under no obligation to keep your coverage for the entire policy period.

While that’s one route, there are also other ways to secure temporary car insurance.

Types of temporary car insurance coverage

If you find yourself looking for temporary car insurance, consider whether one of the following options would be best for you. 

• Six-month policy canceled early. The simplest approach is to buy a standard six-month policy and then cancel it once you no longer need coverage. Most insurers let you pay month to month, so you won’t be stuck overpaying and waiting on a refund. “You’ve just essentially achieved a month-to-month policy,” Cegelka explains.
• Non-owner car insurance. Non-owner car insurance is ideal for those who don’t own a vehicle but participate in a rideshare program or otherwise borrow or rent a car to drive. These policies are typically less expensive, but not all insurers offer this option.
• Rental car insurance add-ons. If you’re only driving a rental, major rental companies let you add insurance directly to your agreement. It’s a convenient short-term option, and if you’re traveling, your travel insurance policy may also include rental car coverage.
• Usage-based or pay-per-mile coverage. Some insurers now offer per-mile coverage that may be a good choice for infrequent drivers. These programs track your driving and set rates based on your usage. Newer companies such as Metromile and Mile Auto specialize in pay-per-mile coverage, but you can also find these plans at more established companies, such as Allstate Milewise and Nationwide SmartMiles.

While each option has its place, Goldberg notes that “for most drivers, a six-month policy provides the right balance of flexibility and affordability.”

How does month-to-month car insurance work?

Insurers usually stick to six- or 12-month policies since they’re easier and more cost-effective to manage. Still, you’re not locked into keeping coverage for the full term—you can buy a policy and cancel it once you no longer need it.

To create your own month-to-month car insurance, follow these steps:

1. Compare auto quotes for six-month policies
2. Purchase the policy that best meets your coverage needs and budget
3. Select the option to pay premiums monthly
4. Cancel your coverage when no longer needed

Before choosing this option, make sure you understand the rules. Check your insurer’s cancellation and refund policy, along with your state’s laws. In some states, companies must cancel your policy when you ask and return any unused premium. In others, they might require advance notice or charge a small cancellation fee.

Michigan law, for example, requires that insurers cancel coverage at any time at the insured’s request. North Carolina, meanwhile, has a law mandating continuous liability coverage. If you cancel coverage before returning a vehicle’s license plate, you could get hit with a fine.

Check with your state’s insurance department for more information on cancellation laws in your area.

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Who needs temporary or short-term auto insurance?

Temporary or short-term auto insurance is typically needed for those who don’t own a car or who are transitioning between jobs or homes.

You might find short-term insurance useful in these scenarios:

• When you’ve sold your car but haven’t bought a new one yet
• If you’re moving and won’t need to drive in your new city
• When a college student is home for a few months between semesters
• If you’re borrowing a car for a short time
• When you’re driving for rideshare or delivery but unsure how long you’ll continue

Let’s look at how this plays out in real life:

Peter works for a global accounting firm and was relocated to Hong Kong. About two months, before he and his wife left the country, their auto insurance was renewed. Peter switched from a biannual to monthly payment schedule, and when it came time to move, he called his agent to cancel coverage. Since he lived in Florida, he dropped off his tag and registration at a local motor vehicle service center, as required by law. About a month later, he received a small refund from his insurer since his premium was prorated for the final month.

How much does month-to-month or temporary car insurance cost?

Across the U.S., the average cost of a six-month car insurance policy is $309, or about $51 a month, according to our data.

If you’re able to find true month-to-month car insurance from a specialty carrier, expect to pay more because the insurer needs to reissue the policy every month. That raises their costs, and the expense gets passed along to the consumer.

Costs can also vary significantly by state, with average costs ranging from less than $25 to more than $100 per month.

Cheapest month-to-month insurance by state

Where you live plays a significant role in how much you pay for car insurance. State insurance requirements, population density, and accident rates – along with your own claims history – can all affect how much you pay for insurance.

Drivers in rural states like Vermont and Wyoming – where average monthly insurance rates are lowest in the nation at $24 – often pay less than those in more densely populated areas. 

The most expensive states, according to our data, are Delaware at $106 per month, Florida at $101 per month, and New Jersey at $94 per month.

Here’s a state-by-state look at how much drivers pay per month for car insurance:

Alternatives to temporary or month-to-month car insurance

Canceling your insurance when you no longer need it is easy, but it could have unintended consequences. Most notably, it could cause a gap in your coverage that may make car insurance more expensive later.

Many insurers offer discounts for continuous coverage, early renewal or a certain number of years without a claim. However, if you cancel your policy, you’ll be starting over from scratch when you buy insurance again. For that reason, Cegelka suggests looking into something like storage insurance for a car you won’t be driving or driver-only insurance if you won’t have a car.

If neither of those options work for you, you could also do the following for temporary coverage:

• Be added as a named driver on someone else’s policy if you borrow their car
• Use insurance coverage offered by rental car companies when driving their vehicles
• Sign up for a pay-per-mile or usage-based car insurance policy intended for low-mileage drivers

Maryalene LaPonsie

 

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Insurance expert Maryalene LaPonsie has been writing professionally for 25 years, with the past decade focused on personal finance -- insurance, investing and retirement. She is a regular contributor to U.S. News & World Report, Forbes Advisor, USA Today Blueprint and Money Talks News.