When you buy an automobile insurance policy, you are usually presented with a number of options for payment. The two most common options are paying in one go and paying in instalments. If there are not costs to deferring payments most people would go for this option. However, there is often a clash between the insurers wanting the money in advance and customers preferring to delay.
Instalment option is not offered by all the companies. This is mostly selected by those customers who does not have enough money right now to pay premium in one go. They opt to make the payment on monthly basis. This option is more manageable, but it is quite possible that you end up paying more than your actual premium because of the interest. Paying the whole premium at once might offer discounts as well.
Although most auto insurers will offer several options, you might need to check the charges and the length of time given. When motorists are not much flexible with how they can pay, they should check the possibilities when they get quotes. This can make one quote more attractive than the other.
For car insurance companies, customers paying at the start are the best as they get an assurance that they will not loose them easily. This is because customers who opt to pay on monthly basis might shift to a company offering lower rates. Also, sometimes people just stop paying the premium that will force the cancellation and related administration burden.
There are different payment plans offered by various providers. For example, you can opt to pay higher monthly instalments to complete the payment in just three to four months. If you want to pay in longer time, then you can also go for small instalments which will be deducted from your account every month. Some firms may carry credit check on the customer before they approve longer period instalments. They like to make sure that the payments will not be missed.
There are some disadvantages of this option. A major drawback is that you end up paying more than the finalized premium. Generally, there will be certain amount of interest charged for deferring the payment. Also, you will not get discounts. Apart from this, if you fail to make the payment in timely manner, your vehicle insurance policy will be cancelled either automatically or they will serve a short notice to that effect.
The best option is to keep checking if your bank account has enough money to pay the premium every month. Some companies also accept payment through money order or check. If this is your preferred mode of payment then go ahead, but make sure that the payment reaches the company in time.
If you cannot maintain your auto insurance monthly instalments, then the best option is to pay the full amount at the beginning as this eases the worries. As a result, you can ask for more discounts for upfront payment. Some companies can offer extra savings between 5% – 10% to improve their cash flow.
Interest charged for instalment methods can be more expensive than credit card interests. Plus, you get about two months interest free period with most cards now. So, paying by card and managing to pay it back nicely can be another option.