For many insurance policyholders, the thought of paying six months of premiums at once can be daunting. Who can afford to fork over hundreds, maybe even thousands, of dollars at once? But most insurance companies offer month to month car insurance for a small fee.
Options
Most car insurance companies offer two options to policyholders: pay for the entire term up front or pay monthly. Some insurance companies define a “term” as a year, some six months, but either way a huge chunk of money will be coming out of your bank account. Unfortunately, many insurance companies charge monthly fees for the convenience of paying in installments. We’ll go through the pros and cons of each payment method to help you decide which is right for you.
Pro #1: Balancing Your Budget
For those who keep a family budget, paying month to month car insurance allows you to better manage your funds. You’ll know each month exactly how much is coming out and avoid that huge withdrawal every three or six months.
Pro #2: Less Commitment
While any insurance company can charge you a fee for canceling mid-term, the fact that you haven’t paid in advance gives you a little more freedom to change insurers if a better deal should come along. If you paid up-front, the company will reimburse the balance, but you might find yourself waiting weeks or even months for that check. Paying monthly allows you to keep those funds in your bank account.
Pro #3: Test Drive the Company
If you’re trying out a new insurer, paying month to month car insurance allows you to get a feel for the company and see if it lives up to your expectations. Too many people have been lured in by promises, especially in advertisements and online quotes, only to find hidden fees once the policy is actually signed. Paying monthly allows you to escape if things aren’t as they originally seemed with most of your bank account intact.
Con #1: Fees
If you have the money on hand, paying six months or a year of premiums may be the cheaper option. The fees for paying monthly can be as much as five percent of the overall premium, which adds up over the course of a year. But not all insurance companies charge for this, and of those who do charge a “convenience fee,” some only charge a dollar or two per month. Check with your insurance company to see what your cost would be.
Con #2: Inconvenience
For some, writing a check and mailing a bill every month can be a hassle. Add a postage stamp, and the cost of paying monthly goes up. Customers who use online bill pay may find it cumbersome to remember to go in and pay that bill every month when it comes in the mail. However, many insurance companies offer direct withdrawal options and some will even charge your monthly payment to your credit or debit card.
Conclusion
Only you know the best option for your family. Price the leading competitors and find out what fees they charge for month to month car insurance. But sometimes a few dollars in fees is worth it for the convenience of having money in your bank account.