You should pay your car insurance bill once or twice a year in most cases. How often you pay car insurance premiums depends on the company and your preferences, but annual or semi-annual payments are best. That’s because most car insurance policies last six or 12 months, and most car insurance companies give a discount – as much as 20% – for paying your premium in full upfront.
Most people either pay in full or choose monthly installments, but your insurer may also offer quarterly payment plans, meaning you’d pay every three months (four times a year). You may want to think twice before choosing one of the more frequent payment options, however.
The more frequently you pay, the more your coverage is likely to cost, due to:
Higher Premiums. If your insurance premium costs $1,000 a year, your insurer might charge slightly more than $83.33 per month (how the math works out if you divide by 12) if you want to pay monthly. They might charge $87.50 per month, for example, bringing your annual total to $1,050. The extra cost is needed to cover additional administrative expenses associated with monthly billing.
Fees and Penalties. There often are processing fees for electronic payment methods like bank transfers and credit cards. They apply to each payment, so fewer payments means fewer fees. There’s also the added risk that you’ll forget a payment when you add more due dates to the mix, and that could result in late fees as well as penalties for lapsed coverage.
Remember, you are required to pay your bill in advance to be covered, but how far in advance depends on your preferences and the insurer’s policies. On a monthly payment plan, you’re paying for next month’s coverage in advance. If you miss a payment or pay late, you’ll be left uninsured. The insurer must collect the premium for your policy to be binding and up-to-date.
Finally, it’s worth noting that most car insurance quotes are based on a six-month policy paid in full at the beginning of each term. But insurers generally have other options available. Before you pick a payment plan, make sure you’re clear on the details and ask about other discounts you may qualify for.
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