Years ago, the only option for paying your premium for your auto insurance was to pay in full. Now that making monthly payments is the norm, insurance companies have had to come up with billing options to provide better customer experience.
But which is the best way to pay?
You will want to check on all the options your insurance company offers. That way you can make an informed decision about the best way to pay.
Some companies will charge you administrative fees or processing fees to pay in any other way than in full. You will want to find out what the fees are and how often they are charged. You will want to figure this amount into your premium so that you can also make a more informed decision if you are shopping for car insurance rates.
What Factors Should You Consider?
For Paying In Full:
For Paying Monthly:
- If you typically manage your finances monthly, and you do not have extra to build a large savings, then monthly payments will be a better option.
- This allows you to allocate your monthly, bi-monthly, or weekly paychecks to build enough in your account to pay the amount when it comes due.
Don’t Like Paying Extra Fees?
It may seem unfair that just because you cannot afford to make an annual or bi-annual car insurance payment that you have to pay more. In this case, you will want to explore any options that your insurance company might have to reduce the fees.
Sometimes, you can pay half of your car insurance and you won’t be charged monthly fees. This might be easier to manage if you have six-month policy periods.
Considering this, it may cause you to want to do some car insurance shopping
if you currently have an annual policy. Or, if you do have an annual policy, check and see if they can break down your payments quarterly. Perhaps you can manage to pay three
months at a time rather than monthly and save some of those installment fees.
Another possibility is to set up automatic payments by authorizing Electronic Funds Transfer (EFT) from your checking or savings account. Typically you will have to sign an agreement to provide authorization, but some companies have a way to electronically sign documents on their website to make it easier.
Many companies will waive their monthly processing fees if you set this up mainly because they feel that they will be more likely to receive your payment and your policy will not lapse.
Bottom line is that you need to figure out which method is going to
work best for you. You should take the few moments of a phone call or visit to your agent to get all your options. You do not want to make the mistake of paying more for your car insurance premiums than necessary!