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Monthly vs. Annual Auto Insurance Payments

Auto insurance is an expense that pretty much all of us have to deal with. The price of auto policies has gone up and up along with the price of everything else through the years. Most of us consumers have to do everything we can to help us deal with the cost of our car insurance premiums. There are many different ways to do this, from shopping around for coverage to adjusting limits of protection and raising deductibles. But one very simple way to make the premiums we pay for auto insurance easier to handle is to simply adjust the payment schedule. Many policies exist as either six or twelve month coverage periods. But not every consumer pays for that much protection all at once. There are multiple options on paying for auto insurance. Monthly vs. annual auto insurance payments each have their distinct advantages when it comes to helping us free up money for all of our other financial obligations we have to deal with each month.

Cheap Auto Insurance is Rare

Most auto policies are more costly than we'd like them to be. In reality, many drivers agree to the terms of the plans they sign on for simply because they represent the best deals these drivers could come up with. There is only so much a driver can do to hold down the cost of a policy. Cheap auto insurance is rare, even for good drivers with solid driving histories and spotless credit reports. The cost of medical care and auto repair keeps driving prices of auto insurance higher because the insurers themselves are paying more to pay out on these claims as time goes by.

Auto insurance is mandatory for most all drivers in all areas of the country. There are exceptions, but most require the advancement of substantial capital. Those of us who are concerned with the question if whether to pay for auto premiums by the month or all in one chunk obviously do not have that kind of capital in most cases. So the group we can assume to be interested in this comparison is made up of those of us who need to do everything we can to free up as much positive cash flow as we can on a monthly basis. To this end, both monthly and annual payment methods have certain advantages.

Monthly Auto Insurance Payments

Most automobile insurance policies cover a period of six or twelve months, although there are some that span three months or some other time frame. In most cases, auto insurers give consumers the option of choosing to pay for the entire balance of their policies in advance or spread out those payments over time. The payments can be broken up into even monthly increments. In this type of setup, the auto insurance company would be doing the insured driver a favor by allowing them to pay a little at a time, such as with online arrangements. Yet the insurer would not actually be risking all that much by doing so, because this setup essentially creates a month to month policy. If one payment is missed, the policy can be canceled and the insurer has not lost out on anything.

For drivers, monthly payments for car insurance are nice because they allow the drivers to get insured and registered without having to come up with a whole lot of money beforehand. This can be especially helpful for low income or high risk drivers, who might find it especially troublesome coming up with a whole policy premium ahead of time while still attending to other current financial obligations. In exchange for this flexibility, of course, consumers pay an installment fee for every installment payment they make on a premium. When making monthly payments, those fees can really add up.

Annual Auto Insurance Payments

By contrast, paying the entire premium all at once saves a driver from having to deal with those fees. In some cases, insurers even offer discounts for paid in full policies. This setup is sometimes ideal for seasonal workers who have large chunks of money at certain points in the year and who want to use it productively to help them through the leaner times. Setting up annual payments on a policy also saves a person from having to worry about remembering to make payments on time once a policy is established. And it frees up all income for the other eleven months for other expenses. But it is hard for many drivers to come up with the money up front to do this.

Both monthly and annual payments have their advantages and drawbacks as far as car insurance premiums are concerned. Drivers have to come up with the payment plan that works best for them given their own personal financial situations.

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