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Making Monthly Car Insurance Payments

A typical auto insurance policy will come with either six months' or a years' worth of coverage. Car insurance providers usually bill their policy premiums all at once, offering their customers the chance to pay for the entire coverage period policy premium ahead of time. These days, however, fewer working-class Americans have the financial capital to pay for that type of purchase in full, particularly when buying more expensive coverage like comprehensive and collision policies containing high liability limits and medical coverage. Fortunately, there is another option that exists for car insurance customers. Purchasing a policy by putting part of the balance down and then making payments every month or on some other installment plan can help people who cannot afford to pay for all their coverage at once to get into a policy and get their cars out on the road with legally mandated coverage.

What's Different about Monthly Car Insurance?

Just like with any traditional car insurance policy covering the vehicle for a predetermined length of time, monthly car insurance policies can be purchased for 12, six and even three months' worth of total coverage. The first and most prominent difference is in the amount of money required upfront. In a prepaid six or 12 month auto insurance policy, the entire policy premium is normally paid at renewal, with the entire premium die by the effective date of coverage.

Some traditional policies give insured policy holders the option of making a few installment payments. In these situations, those insured usually have to put down a certain percentage of the overall premium by the time of the effective date of coverage, with the remainder due in two or three installment payments spread out over the policy period. In many cases, these installment payment due dates fall early in the life of the policy, helping the insurance company to limit their risk against non-payment.

In exchange for this sort of payment arrangement, car insurance policy holders agree to pay an installment fee, usually a specific dollar amount added to each installment payment. When as a consumer you have multiple installment plans to choose from, the advantage of selecting the one with fewer payments is primarily financial, since this choice will usually save you on installment fees.

With a monthly car insurance policy, the payments are spread out even more than they are in other installment plans for car insurance coverage. In many cases, the policy holder can get into a policy and get a proof of insurance allowing them to legally register their vehicle for little or no money down. The balance of the premium cost is equally spread out over three, six or 12 months, allowing the car owner to pick up legal coverage without a large outlay of money on the front end.

Drawbacks to Monthly Auto Insurance Policies

Monthly auto insurance policies are a wonderful option for consumers who simply do not have the extra money available to pay for coverage up front, but who need to get state-mandated coverage to get their vehicles legally on the road. Many of us have been in this sort of situation at one time or another in our lives, when we just do not have the financial capital to pay for something like this ahead of time. If you have ever chosen to drive without insurance and been pulled over or involved in a car accident, you know how important it is to maintain adequate coverage even when your bank account is in rough shape. The truth is that driving without car insurance can compound your financial troubles, and even add a legal element to the headaches you are already trying to endure.

There are certainly drawbacks to monthly car insurance policies, both for drivers and for auto insurance providers. For policy holders, the negative attached to this type of coverage is purely financial. As a purchaser of a car insurance policy with monthly payments attached, you are responsible for all the installment fees associated with the policy. Most customers pay an installment fee with each monthly payment they make, meaning that while this type of coverage is a great way to get into an insurance policy if you do not have any money to pay for coverage up front, you will pay extra installment fees even when compared to a policy in which you put some money down and pay the rest off in the first few months of coverage.

Another financially related potential drawback for customers thinking of getting monthly car insurance to think about is in the policy premium itself. Since insurance companies offering this type of coverage are somewhat more exposed to the possibility of non-payment from customers purchasing monthly car insurance, they have to hedge themselves against such risk, and surely the possibility of non-payment is figured into the policy premium itself. Unfortunately, many drivers who choose to drive without proper car insurance utilize this kind of coverage and either pay for one month's coverage or none at all, using their proof of insurance to get their license plates renewed, then stop paying on the policy. This type of behavior drives up the cost of monthly car insurance policies, and of car insurance in general. The honest policy holders have to pay for the sins of those who exploit the system, because providers have to make ends meet in order to stay above water themselves.

Final Considerations on Monthly Car Insurance Payments

Overall, having the option of making monthly car insurance payments can be very helpful to anyone having a harder time making ends meet these days. There are multiple advantages of selecting this option if your cash flow situation does not allow you to pay for your entire policy premium up front. For one thing, the monthly installment fees are usually relatively small, sometimes less than ten dollars. While this may seem like a lot of money, think of it as the price you pay to buy yourself all that extra time to pay the premium while still getting coverage for your vehicle.

Another huge plus to the monthly car insurance payment option is that it exists within the realm of traditional coverage policies. In other words, you can still get a policy stating that you have six or even 12 months' worth of insurance coverage without having to pay hundreds or even thousands of dollars up front to get that coverage. The only way the length of the coverage period can be affected is if you miss a payment. You can help prevent this by making your payments on time, and you can even opt for automatic withdrawal of your payments from your personal checking account to ensure that your insurance provider gets them on time each month and your coverage isn't compromised.

Another, maybe less obvious advantage to a monthly policy is the relative ease with which you could cancel coverage if you were to sell your car or move out of state. Since you are paying by the month, you do not have to worry about waiting for months' worth of reimbursed premiums if you do cancel. This option is well worth considering in many ways.

 

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