Most companies allow their policyholders to spread their premium in several ways and the monthly car insurance payment option is very popular because most people like to face bills in the interval they are paid for budgeting purposes. This doesn’t mean that your policy runs month-to-month. You still get a 6 month policy with most companies. However, you need to make sure your payments go through every month to avoid getting your policy cancelled for non-payment.
Often companies require larger first payment or deposit from new policyholders. For example, they may require you to pay 30% upfront and divide the rest of your auto insurance premium into 5 monthly payments. However, many insurers start dividing the premium nearly equally over six month for renewals and established customers. Every company may have their own ways of dividing premiums when customers choose monthly vehicle insurance.
Essentially, you pay your premium monthly in advance just like rent for your apartment. The only difference is that you don’t pay a deposit but your payment still needs to remain ahead of your coverage. You cannot start a policy without paying the first installment, which in effect serves as a deposit and therefore may be slightly larger than the rest of the monthly payments. Another reason for larger initial payment may be because the fees are added to the first installment.
The biggest concern with monthly automobile insurance payment plans is the possibility of missing a payment that may result in your coverage getting cancelled. That is why most companies would strongly urge their customers to arrange an automatic payment plan. A few companies actually offer a small discount of 3% on average when policyholders set up Electronic Funds Transfer (ETF) to pay their premiums.
Remember that EFT can only pay your monthly car insurance if you have enough money in the account. Although it is a great solution, you still need to make sure that your payments are going out every thirty days.
Usually, insurers charge a small fee for installments to pay for administration and bank fees. The amount can change from one company to the other and in some cases can be 2 – 3% of the premium.
Most people choose monthly car insurance because of the budgeting reasons. They intend to keep their policies for the full term and renew as usual. However, some people may see it as a solution to get month-to-month auto insurance. Usually, companies don’t sell policies for a less than 6 month policy term.
So, if you are looking for a temporary policy, the next best thing would be to buy a standard six month policy, set up monthly payments and cancel your policy when you don’t need it any more. There may be a small cancellation fee with some companies. Then, they calculate the total premiums for the period you were covered and send you a refund if you overpaid or ask a little bit more if the amount you paid so far doesn’t cover the period you were insured plus cancellation fee.
Monthly car insurance payments can help motorists who currently have money issues, need short-term coverage or are looking to switch shortly as they pay only the 1st month premium and get instant proof of insurance. However, the majority of people arrange them because that is how they like to pay their bills and have no intention of breaking their policy contract before the renewal. They are standard six month policies with spread payments and widely available from nearly all insurers.
There are various other options. You can have a traditional large initial installment followed by 2 or 3 further payments or settle the premium in full and forget about it.
Most auto insurance policies are for 6 month today that makes it easier to pay the premium in full. Many companies offer a 9% discount on average for full payment. You also eliminate the risk of your policy being cancelled for non-payment and avoid any installment fee.