There is always a clash between companies wanting the money quickly and customers wanting to hold onto it as long as possible. Many people may not realize that premiums are technically due at the start of policies and any spreading allowed is considered as a favor but it isn’t free. You are usually presented with several auto insurance payment plans because there are now commonplace. If there were no cost to deferring most people would go with it. So, let’s have a look at the choices available in the light of possible costs and discounts.
Large numbers of policyholders may choose one of the installment plans because they are easier to manage than coming up with the whole amount at once. The only downside to it is that you are likely to end up spending more due to the interest and fees. Furthermore, settling at once might yield a small discount.
Although most automobile insurers may appear to have similar offers you might need to check the charges and the length of time given. Actually, it may make more sense to look at it at the time of getting quotes when you are not much flexible with money. Often such people would prefer to break the premium down to bitesize even it costs a bit.
What Is an Installment Fee for Car Insurance?
You may think that they are kindly allowing you to handle it in manageable bits. You should know that they usually add a charge for these facilities and often different amounts are involved depending on the source of finance. This is like an administration fee and usually separate from the interest.
Additional expenses can be different depending on the vehicle insurance payment plan chosen. For example, a few carriers are known to allow 3 installments at a minimal or no cost. Others may be fine with longer arrangements but they would normally add a bit extra on top for it.
Approval process is another matter. First of all, nearly all of them would want the money come out automatically from a checking account and like to set it up there and then. Rarely, they agree to leave it all up to you to send it in manually. Also, they often carry a credit check on customers before approving these agreements. These all may sound that they are being picky but they don’t want to deal with missed premiums and consequent cancellations.
How Does Automobile Insurance Payments Work?
Nearly all of them show some level of flexibility. Auto insurance activates as soon as the first agreed amount hits their account but it is probably cancelled if you miss the next one. Then, you would be facing the dangers of driving without insurance. It is policyholders’ responsibility to make sure the money gets to its destination in a timely manner.
The main reason most carriers aren’t keen on these arrangements is the problems they face down the line. Often motorists think nothing of these commitments. And some of them see stopping it as a quick way out when they don’t want the policy anymore. Often it gets cancelled on the other end as well when the next amount doesn’t come in and both parties leave it at that.
However, a few of them will report non-payment of the premium to credit agencies and that will affect the score. In that case, it would be seen in the report if anyone looks at it close enough. Therefore, the best way of terminating a policy is by giving notice.
Is Car Insurance Paid in Advance or Arrears?
Technically, it is due in full at the time of policy activation. So, any deferred plans are considered a credit facility hence the fees and charges for it. Hopefully this point makes it easier to appreciate the deals and reasons for extra costs incurred.
Whichever way it is done, insurers would make sure that at least time on risk is settled in advance. For example, if it is a monthly plan you pay the first sum on day one in advance to cover the next 30 days. They usually don’t let you fall into arrears and can even take drastic actions like cancelling it for being late. It is a good idea to check if there is any grace period before they do that.
Can You Pay Automobile Insurance Monthly?
Most drivers may feel that there is nothing to it and they can choose without a bother. This option is generally available but may require good credit score. Also, monthly costs more due to additional charges discussed above.
A few companies may offer accelerated plans that are similar to monthly but they usually have fewer payments and finish earlier. In return, you get charged less. So, you should look at the costs before you agree to anything.
The fact of the matter is that the further it delays the more nervous companies get and they like the assurance of having the money in the bank. Once it is out of the way, policyholders relax as well and they are unlikely to look for alternative offers until at least the next renewal. Otherwise, there is always a chance of something going wrong and losing customer one way or another.
Disadvantages of Paying in Installments
A major drawback is that you end up spending more than the quoted figure. Generally, there will be certain amount of interest added. Also, you will not get discounts. Apart from this, missing any one of them is likely to result in policy cancellation automatically, unless they clearly offer any grace period, which is often not the case.
It is necessary to make sure you have enough funds in the bank before any electronic transaction is due to leave the account. They rarely accept money order or check, which require manual action to ensure they get it before time for the funds to clear.
Motorists need to take a few things into consideration including financial position, character and viewpoint before they make a decision on these things. You may not be confident about managing monthly vehicle insurance installments. Then the best option is to get it over with it at the beginning, as this eases the worries. As a result, you can ask for a discount as well. They often offer an extra saving around 5% to improve their cash flow.
Interest for installment methods can be more expensive than credit cards. Plus, you get about two months interest free period with most cards now. So, settling with it and managing it nicely can be another option. This post goes to show that you shouldn’t just jump in before getting a few quotes and checking the final amount after everything else included.