Should you pay your car insurance annually?
While most people opt to pay their car insurance monthly, did you know that many insurers give customers the option to make annual payments? In fact, paying annually instead of monthly can save as much as 20% a year. However, paying monthly also has its own positives too, so how do you know which payment method is right for you?
Pros of paying monthly
Paying your car insurance monthly is the most common way to go about things, and basically sees customers paying small installments towards their overall annual fee each month. This method of paying means that customers can set aside money for payments as part of their monthly budget, and is great for people who are living paycheck to paycheck, or don’t have excess savings on hand to pay one large lump sum.
If you ever decide that you wish to cancel your policy, for someone making monthly installments, there is a lot less hassle closing their account without losing out on money.
Cons of paying monthly
While spreading the annual cost of your insurance over 12 months is convenient for a lot of people, it has its downsides, too. Firstly, you will have to pay an administrative fee every month, as well as the chunk of your premium owed. Secondly, if you can’t make your payments on time you will be charged a late fee-if you find yourself in this situation more than once it can leave you out of pocket. Finally, some insurers actually use monthly payment schedules as an opportunity for profit; sometimes tricking customers into paying more money over 12 months, than if they paid the whole thing up front.
Pros of paying annually
Although paying your auto insurance in one go may seem a little daunting, it is actually always the least expensive option. Many companies actually offer discounts for customers who choose this method of payment. It also means that you save on having to shell out extra for a monthly admin fee. You also reduce the risk of having to ever pay a late fee.
Getting the bill out of the way at the beginning of the year is really helpful for people who may work seasonally, or have a fluctuating income.
Cons of paying annually
While you paying annually definitely saves you money, it can be a lot for someone to pay for in one go. Another downside of paying upfront is if you ever decide you want to cancel your policy, not only do you run the risk of losing out on money, you will also be subject to a cancellation fee.
When it comes down to it, how you decide to make your payments is really a personal decision based on what works best for you financially. It’s important to find out exactly how much of a discount your insurer will give you for paying your policy in one go. If you feel the saving isn’t worth the investment, there are other ways you can save on insurance such asbundling your auto and home insurance policies, or installing safety features in your car. Alternatively, consider searching the market to see if any other insurers could be offering you a better deal.