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The Secret to Getting Cheap Short-Term
Car Insurance in the U.S.

by David Thompson

If you live in the US and you've been searching online for short-term car insurance to cover you for less than twelve or six months, you've probably run into a lot of companies in the UK. Over there, short term auto insurance is normal, but here, not so much.

People still need short-term car insurance in the US, though. And there's a way you can get it. Maybe you're planning to buy a cheap car while you're at college, then sell it. Or buy a car for a summer job, then sell it when you're back to college. Or you're a retiree with a car that gets stored half the year at a winter or summer home.

Here's the secret:

Pick the cheapest couple of auto insurance companies, give them a call and ask them about "short rate cancellation." Most companies charge a fee if you stop the insurance before you have it a year, but even with the fee, it's still cheaper to cancel the insurance after three months, for example, and get a refund for nine unused months, minus the fee, than to pay for car insurance that you don't need for a whole year.

The short rate fee is usually quoted as a percentage of your refund. They might charge a fee of 10 percent of your refund, for example. But you'd still come out ahead. Some companies may charge a flat rate penalty instead of a percentage. Though you can generally decide to cancel your coverage, insurance companies usually aren't allowed to decide on their own to cancel your policy in the middle of its term, as long as you've had it for a certain number of days, unless you've failed to pay your premiums, had your driver's license suspended, or something similar. State laws vary, as do individual insurance contracts, so always ask beforehand to be sure.

If people don't know there's such a thing as a short rate fee, they can feel ripped off when their refund isn't as much as they expect. But hey, that's just the way it is. If car insurance companies did sell three-month policies, they'd probably charge more per month anyway.

When you find the cheapest car insurance that has a fee you can live with, apply for the insurance for one year and request to pay monthly. Pay the bills as they come in, and when you've had it as long as you need it, notify the company that you want to cancel it. Find out how you have to notify them, because they may require you to contact them in writing and not just call or email. They should stop the insurance on the date you request and send you a small refund or a small bill to settle up. Even with the fee, it'll still be cheaper than paying for auto insurance for more months than you need.

Insurance laws concerning short rate cancellation fees may vary by state, so be sure to ask before signing a contract.

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