Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates. He has also been featured on sites like UpJourney.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Apr 20, 2020

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Things to remember...

  • Most car insurance companies have their policies written for six months
  • Car insurance companies also offer monthly payment plans
  • Car insurance premiums are paid upfront
  • You may be required to pay an extra deposit to start your policy

When it comes to managing your car insurance policy, it’s important to know the basics of payment and when the premium charges will hit your bank account. When you buy a car insurance policy, you are required to pay your bill up front. The insurer must collect a premium for an insurance policy to be binding and up-to-date.

Also, the advance payment is meant to act as some form of backup to be used in case of a claim. Previously, you could only pay for auto insurance for six months or one year in advance.

Drivers had to have some forethought and budgeting so as to have enough cash to foot that annual or semi-annual bill.

As more states started requiring their drivers to have auto insurance, insurers began to make this exercise more convenient by availing insurance policies with monthly payments.

When you settle your monthly premium, your insurance policy will be up-to-date until your next bill is due. If you are late or miss a payment, your insurer may decide to cancel your policy.

If you cannot afford to pay your monthly insurance premiums because they are too high, you can shop around and compare quotes to get a deal that is within your budget. Enter your ZIP code into our free comparison tool to get started.

Benefits of Monthly Payments

Making monthly auto insurance premium payments has both personal and financial benefits. The biggest one is that you will not have to save extra cash in the course of the year for your auto insurance. Also, a lump sum bill can wreck a household budget.

For individuals who do not have a savings account or live from paycheck to paycheck, monthly car insurance payments are the only options.

Another benefit of monthly payments is that you will know the due date of your car insurance rather than waiting to be notified by your insurer about the entire premium payment.

You can set automated payments by activating a debit or credit card. Most insurance companies also have web portals from where you can check and pay your monthly payments.

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Benefits of Annual Payments

Other than saving money, paying your premium annually also has its advantages. For starters, it buys you a full year’s worth of peace during which you will not have to worry about missing a due date or incurring late payment fees or your insurance getting canceled.

This is the best option for people who have problems keeping up with monthly bills.

Also, you will be able to pay for a whole year’s premium after getting a considerable amount of money, like the way retirees or seasonal employees who receive quarterly payments from investments accounts do.

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Late Payments

If you choose the monthly payment option, it is important that you settle your premiums on time. Most car insurance policies get canceled due to nonpayment or making multiple late payments.

If for one reason or another you will not be able to pay your monthly premium or you will be late with your payment, it is best to reach out to your insurer and discuss your options.

If you notice that you consistently cannot afford your auto insurance payments, then it is time you started comparing different insurance policies and policy providers to find one that meets your monthly budget limitations.

Remember that:

  • You must make your monthly car insurance payments on or before the due date.
  • Late payments can lead to the cancellation of your insurance policy.
  • Shopping around can help you find a car insurance policy that is affordable.

How to Lower Your Car Insurance Premium

There are several ways of reducing your car insurance premium and making it more affordable.

  • Ask about available discounts – There are relevant discounts for safe drivers, people with multiple policies, cars with certain safety features or multiple vehicles insured with the same insurance company. Ask your insurer which ones are available to you.
  • Raise your deductibles – For those car insurance policies that require deductibles, assuming more of the financial liability for future accidents by increasing your deductibles will help you reduce the risk of your insurer.
  • Reduce your insurance coverage – For those who drive an older vehicle that is paid off, reducing your insurance coverage can be beneficial to you. Switch from comprehensive coverage to liability coverage.
  • Research other policies and providers– Different insurers have different rates since they use different formulas to calculate driver risk. It is good to do your research and find other policies from different insurance providers that may be cost-effective and provide better protection than your current policy.

Most insurers will allow you to settle your bill in monthly installments. It is, however, important that you take the necessary steps to avoid late payments.

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Conclusion

From the above discussion, it is clear that your car insurance should be paid in advance. As to which payment plan is good for you depends primarily on your comfort level and financial situation.

Another determinant is how much savings you are likely to reap if you made a lump sum payment.

It is, therefore, good to confirm from your insurer, how much discount you will get if you paid for one year instead of one month. This will help you make a decision on which company to work with.

On that note, car insurance agents can get you insurance quotes from various companies so that you can compare and choose the one that will give you lump sum discounts and help reduce your budget. Enter your ZIP code below to begin comparing for free.