Car Insurance: The Good and Bad of Paying Monthly Premiums

Car insurance does not give breaks for low income. Insurers will not negotiate lower rates or other options that are available from lenders. You either have to pay the premium or lose the coverage. Because of this, many people seek ways to pay for their car insurance in smaller pieces than paying an annual premium.

Making monthly premiums is becoming necessary for more people as rates continue to rise. There are some good points and negative points to be considered before agreeing to monthly car insurance premiums.

Monthly car insurance premiums let you pay for your insurance in smaller pieces.

If you have cash flow issues, paying for your car insurance one month at a time help your monthly budget. It is much easier to save up for a premium that can be less than $200 and in some cases less than $100 than one that exceeds $1,000. For people who must have a car, the monthly option can be the only sure way to afford to pay for car insurance.

If you are high-risk on your insurance, paying monthly lets you keep insurance in force.

When you have to buy high-priced insurance, it is important to keep looking for cheaper coverage. While you may not locate a cheaper policy at the beginning, it is a good idea to keep looking for lower prices every month. If you pay monthly, it is a simple matter to stop paying for one policy and start paying for a cheaper one quickly.

Monthly premiums can help prevent lapses in coverage for your car insurance.

Paying your car insurance quarterly, semi-annually, or annually always leads to questions about the precise moment that your policy will lapse. Very few people are willing to pay for two car insurance policies at the same time. When you pay monthly, you can change companies and know that, at most, you may have a week or two of overlap between the new and old policies.

Using a monthly draft on your checking account can help keep the insurance paid.

For many people, paying an insurance bill is a low priority item. This means that it will go to the bottom of the stack when paying bills. The insurance premium will stay low priority until a lapse notice is received. By having your monthly premium automatically removed from your checking account, you can avoid risking lapses in coverage. Some companies even offer a discount on their charges for each premium paid other than annually if the premium can be sent through on a draft.

On the negative side, you will ultimately pay more for car insurance with monthly premiums.

Insurance companies always charge an extra amount for making more than one payment per year. These charges can range from around three dollars up to about ten dollars per payment. This can add over $100 per year to your insurance cost for the privilege of paying monthly. If you really have budget problems, finding a way to pay the annual premium each year can save you money.

Unless you use a draft on your checking account, you have to write out the payment every month.

This may seem trivial to some, but many people struggle to make monthly payments on anything. It is not always a matter of money. Just the routine of having to make the effort of writing the check and getting it into the mail can be more than some people can get accomplished on time. This can result in lapses in coverage. For those who must purchase money orders, it is even a greater effort and cost to pay car insurance premiums monthly.

The convenience of monthly drafts from your checking account can remove the incentive to shop for lower insurance prices.

If paying your insurance is too easy, you will lose the motivation to find better premium rates. When it hurts to write out that big premium check once or twice per year, you will seek ways more often to reduce that cost. Once it is somewhat out of your sight by coming through as a monthly draft, you may overpay for car insurance for longer periods before opting to find a better rate.