Auto insurance may be expensive, so paying in monthly installments for the entire year is a welcome relief for many drivers. While this may appear to be the most convenient option, it is not always the most cost-effective. Although most insurance companies offer you the option of paying for your coverage in total monthly or annual auto insurance premiums, how do you know which is the best option? That is entirely dependent on your specific circumstances.
Here are some suggestions for selecting the best payment method for you.
Payments for Car Insurance on an Annual Basis
Annually paying your insurance premiums is almost usually the most cost-effective alternative. When you pay your insurance premiums in full, many insurance companies will give you a discount. This is because paying monthly rates costs the insurance business more money because it requires manual processing every month to keep the policy legal.
You not only save money by paying an annual fee, but you also get the payment out of the way for the whole year. This is especially useful for persons whose income varies throughout the year or is seasonal, who receive an annual bonus or receive a tax refund. It can also aid folks who are having problems making their monthly payments. If you frequently incur late fees, paying your insurance payment once a year could save you money. It may even save your coverage from being discontinued if you fall behind on your payments.
Car Insurance monthly payments
If you can not pay the entire year’s insurance premium in one lump sum, most insurance companies now offer a monthly payment plan as an alternative. Instead of paying the whole premium once a year, the premium is divided into 12 equal monthly payments. This can be a convenient method of paying your premium. However, most organizations impose an installment fee for this convenience because processing 12 payments instead of just one require extra work on the company’s side.
For some people, paying in monthly installments is a better alternative, even if there is a monthly cost. Because most people budget their money monthly, it allows you to stretch the cost of the premium out over time. Because most people have a consistent monthly income, it’s simple to set aside the premium and pay it along with their other monthly obligations.
Assume you plan to remove a young driver from your insurance before the end of the year. In that case, you’ll want to be able to do so and see instant savings.
Monthly payments may also be an excellent option for someone who has enough money to pay an annual premium but would instead invest it or put it toward another significant expense.
The Price Difference between Annual and Monthly Auto Insurance Premiums
So, which approach is best for you? It is very dependent on your financial status and level of comfort. Keep in mind that making a one-time payment rather than monthly installments will save you money over the long haul. If you save $30 a year in fees, for example, it might not be worth it. However, if you save $300 (or more), the improved bottom line may be worth it if you have the financial flexibility to pay for a year’s worth of coverage.
In any case, finding out how big of a discount your insurance offers for paying for a year rather than a month is vital since it may influence your decision about which firm to give your business to.
Other Points to Consider
Before settling on an annual or monthly payment schedule, look into any payment incentives you may be entitled to. Many companies provide discounts to customers who pay their premiums with electronic payments. Some businesses will also give you a discount if you set up automatic payments. Not only will you save money, but you will never have to worry about paying that bill again.
If you decide between annual and monthly payments, check out if you qualify for any of these reductions. Finally, you want to choose a payment plan for your auto insurance that strikes a balance between personal preferences and cost savings while still providing you with the coverage you require.