If paying your vehicle insurance monthly not only avoids undue financial difficulty for you but also makes it possible to afford the nicely spread monthly premiums and keep you insured, it is undoubtedly a great facility to have and use. On the other hand, paying auto insurance premiums in full will get you as much as a 9% discount with many companies as this reduces the risk of cancellations due to non-payment. Not only you don’t have this chance with monthly payments but also insurers charge processing fees for spreading premium payments.
If your current insurer offers a discount for full payment but you cannot afford one lump sum payment, you can start with monthly payments and get insured now. And start saving for the renewal so that you can pay in full and save money.
It is worth checking for the discount since your current insurer may not offer it and still be fairly cheap. If you want to pay the premium in full you might as well want to check if you can save some money. So, you should get a few quotes and ask the companies with the cheapest quotes if they offer further discounts for paying the whole premium now.
Monthly payments are a commonplace these days and people like the idea of spreading their costs. This makes budgeting easier since people often get paid monthly too. Besides, people can set automatic payments and forget about it. If you are setting Electronic Funds Transfer, you should check if your carrier offers discounts for it. A few companies offer around 3% discount on average for setting up automatic payments. This is something you should discuss at the time of buying your automobile insurance policy to consider your options.
Each method has its own advantages;
|Advantages of paying premiums in full||Advantages of paying premiums monthly|
|You may get discounts for paying in full||Easier to handle the costs even with fees|
|You avoid installment fees||It may be easier to switch companies mid-term|
|No risk of policy cancellation due to non-payment||Makes budgeting easier|
|Disadvantages of paying premiums in full||Disadvantages of paying premiums monthly|
|A large payment may create money problems||You have to pay fees with most carriers|
|It may be harder to switch as your money tied up||You may miss out on discounts for paying in full|
|If you used credit card you may incur high interest||Your policy may be cancelled if you miss payment|
One particular advantage of paying monthly may be utilized by motorists who are planning on switching their policies mid-term. For example, a teen driver may be having a birthday shortly and it is likely they can save a bit more once they are a year older. Or a traffic violation may be coming off your record shortly that would reduce your premiums. Then, you can cancel with the current carrier easily after arranging the new policy. The company will calculate the premium costs up to the point of cancellation and let you know if you are getting a refund or if you need to pay a little bit more for time on risk.
Vehicle insurers return unused portions of the premium once the policy is cancelled but this may take up to two weeks. If you paid your premium in full, a lot of money would be tied up and make it harder to buy another policy, especially if you want to pay in full again. It may be possible but you may need to use some of your savings for it and wait for the refund to return the money back to your savings account.
Nearly all large companies mostly sell 6 month car insurance policies that help people who want to pay in full or can get discounts for doing so. It is easier to pay a 6 month policy in full that some people like to get it done so that there is no chance of a policy cancellation for non-payment.
Although companies are required to give notice before they cancel, monthly premium payers should make sure they don’t miss any payment because some companies may cancel the policy with a notice and don’t reinstate it. Even if you set an EFT, you still have to make sure that you have money in the bank to cover all of your payments at that time. Sometimes, one large emergency payment can drain your bank balance causing several missed automatic payments.
Furthermore, some companies may offer 2 or 3 installment options with no or minimal fees.
Generally, it is best to get a few quotes and find out the cheapest companies first. Then, you can ask about pay-in-full or EFT discount and monthly payment options as discounts or the payment option you prefer may not be available with every company.