How Often Do You Pay For Car Insurance?
You may be wondering how often you need to pay for your vehicle insurance.
Should it be monthly, annually, or even bi-annually? What are the benefits relating to each option and which one should you choose?
In this article, we take a closer look at your options, and provide you with some additional information that will help you to make the right decision.
Firstly, What Is a Car Insurance Premium?
A car insurance premium is the amount of money that you will need to pay for car insurance coverage.
When you shop for car insurance rates and request a quote, you will receive an estimate of your auto insurance premium.
This will then become the basis for your actual vehicle insurance premium.
Many insurance companies will recommend that you pay your car insurance annually. This can save you money because you may receive a discount for the annual payment.
You will also have the option to make a bi-annual payment or monthly payments, depending on your budget and preference.
As long as you pay car insurance premiums on time, you will be legally allowed to drive your car and your car insurance coverage will remain active.
How Do Insurance Companies Work Out Your Car Insurance Premiums?
Car insurance companies will consider a wide variety of risk factors when they calculate your auto insurance premium.
In most states, insurance companies will calculate your auto insurance coverage premiums based on your driving behavior, your driving history, and other details about you and your car.
Here are a few of the considerations that an insurance company will look at when working out your car insurance premiums.
The amount of coverage you buy
If you add more coverage to your policy and buy additional features, such as roadside assistance or rental car coverage, you will get more protection should you be involved in an accident. Unfortunately, your insurance premium will also increase.
Car insurance payment rates will vary depending on where you live and work.
If, for example, you live in a city, your car insurance premium will be higher than that of someone living in the countryside.
This is because there are more drivers on the roads in a city, which means that you are at a higher risk of having an accident.
Your driving history
If you have been involved in any accidents, or have tickets and traffic violations, your car insurance premiums will be higher.
Insurance companies will also increase your car insurance payments if you are a teenage driver, inexperienced in driving, or have just received your driving license.
You will be seen as a higher risk in these cases because historically, these drivers are more likely to file claims with their insurance providers.
Your insurance history
If you have had no previous insurance coverage or had a lapse in your insurance, this can cause your premiums to be more expensive.
The reason for this is that insurers will be unsure of how much you will claim in the future, or will be concerned about your ability to pay your monthly premiums.
Your credit score
In most states, if you have a low credit score, you will pay more for auto insurance as many insurance companies will see you as a higher risk.
People with a low credit score may not seem as responsible when it comes to managing their finances and are considered more likely to have an accident.
On the other hand, if you have a good credit history, you will qualify for discounted car insurance premiums.
The type of vehicle you own
The newer your vehicle, the more technical features it will have—such as parking assist.
These features are difficult and expensive to repair after a car accident, which is what will make you a higher risk. An insurer will raise your car insurance premium accordingly.
How often you drive
If you use your car less than 1,200 miles—or in other words, drive low mileage per month—you will qualify for a lower car insurance premium.
This is because you will be seen as less of a risk to insure as you spend less time on the roads.
The number of people on your policy
Although your car insurance premiums will increase when you add more drivers to your auto insurance policy, it will be cheaper than insuring both drivers separately.
What Is an Insurance Quote versus a Car Insurance Premium?
An insurance quote is an estimate of how much you will pay per year for your policy. This is provided by your auto insurance company before you agree to purchase the policy.
Car insurance premiums are the monthly, bi-annual, or annual amount that you will pay toward your car insurance policy.
This amount should be the same as the amount that you receive in your quotation.
If you want to ensure that you are getting the best price for your car insurance, head to the top of this page, enter your zip code, and get quotes from America’s leading insurance companies.
What Is a Car Insurance Premium versus a Deductible?
A deductible is the amount of money you need to pay toward a claim before your insurance company will contribute to the cost of any repairs to your car.
For example, suppose you select a $500 deductible when you purchase car insurance, and later an accident causes $10,000 in damages to your vehicle.
If your claim is covered, you will pay $500 toward the repairs and your insurance company will pay $9,500.
Deductibles mostly apply to comprehensive and collision coverage, and not liability coverage.
This is different from your car insurance premium, which is the amount that you pay toward your auto insurance policy.
Key Point: The Difference between Comprehensive, Collision, and Liability Coverage
Comprehensive coverage: This is an optional coverage that protects you financially against damage to your vehicle, caused by non-collision events that are not under your control.
Collision coverage: This coverage pays for the damage to your car resulting from a collision with an object.
Liability insurance: If you’re responsible for someone else’s injuries or property damage, this essential insurance will protect you financially.
Should You Pay Car Insurance Monthly, Bi-annually, or Annually?
Once you have purchased car insurance, there is a range of costs that you need to take into account.
In addition to keeping up with your monthly payment on your car loan and maintenance costs, you will also need to pay for your auto insurance premiums.
Car insurance premiums that are calculated and paid once per year are usually the cheapest option, allowing you to save money.
Let’s take a look at the different ways you can pay car insurance and save on your monthly premiums.
Once-per-term auto insurance payment (annually)
Most insurance companies help you save money by allowing you to make one lump sum payment.
This is because if a car insurance company only has to process your payment once a year, this saves them money and manpower.
Most insurance companies recommend that policyholders pay an entire annual premium, instead of paying car insurance monthly.
Once-per-term payments are also easier for you, because this is one less monthly bill that you need to keep track of.
Insurance companies may cancel your policy if you fall behind on payments, which is why an annual payment is the best option.
This way, you know that you have secured car insurance for a full year.
It’s good to know that once-per-year car insurance payments provide you with more affordable car insurance.
Monthly auto insurance payments
Depending on your budget, monthly payment plans help you to manage your cash flow more easily.
Monthly payment options for auto insurance typically come with an installment fee to cover the cost for the insurer to manage 12 monthly payments each year rather than one.
If you prefer to budget for your car insurance rates on a monthly basis, keeping track of a monthly payment may be easier.
When you pay monthly, this also offers you more flexibility. If you need to add or remove a driver or a car, for example, your insurance costs will simply adjust at your next payment.
Six monthly car insurance policy payments
A six-monthly or bi-annual car insurance policy provides you with some additional benefits when it comes to your auto insurance rates.
Similar to a once-per-year plan, you can expect lower auto insurance rates with a bi-annual payment plan.
The insurance provider is able to reduce your car insurance costs, because they will be spending less on manpower and administrative fees to process your payments.
This option from your insurance provider will also allow you to make changes to your insurance policy twice per year.
If your budget allows for this option, car insurance premiums calculated in this way will help you in saving money.
Will Automatic Payments Be Useful for You?
If you have a hard time keeping up with your monthly payment plan, or if you tend to forget to pay your entire premium a year in advance on the anniversary of your car insurance policy, then automatic insurance payments may be a good option for you.
When the payment is automatically withdrawn from your bank account, you will not have to worry about meeting the due date.
This is especially important when you want to make sure that you avoid late service fees or a canceled plan.
Depending on your insurance provider, you can set up automatic payments for monthly, bi-annual, or yearly plans.
Be sure to ask insurance companies about their payment options when getting your car insurance quotes.
Although most insurers offer plans where you can choose to either pay for your premiums every month, six months, or annually, some insurance carriers offer a six-month term for insurance.
With this option, you will get one month of free insurance.
You will find that you will be paying higher premiums for the rest of the term, but the month that is free of insurance premiums gives you a good break and can help you save money.
When Do Car Insurance Premiums Go Up?
The insurance industry as a whole tends to raise premiums if you:
- Are convicted of a serious traffic violation.
- Have points added to your driving record.
- Have skipped making monthly payments.
- Have received speeding tickets.
- Add new drivers or cars to your insurance policy.
- Have created a lot of debt and obtained a resulting low credit score.
Many insurers will reduce your monthly premium when you:
- Improve your credit score.
- Take a defensive driving course.
- Install anti-theft devices.
- Avoid a missed payment or late fees.
- Bundle your insurance policies such as health insurance, home insurance, and car insurance.
You can also save on your premiums if you drop unnecessary coverage. In other words, when you reduce your coverage, you will reduce your premiums.
The general rule is to reduce these types of coverage when your annual premium exceeds 10% of your vehicle’s total value.
For example, with older cars it may not be necessary to have comprehensive as well as collision coverage, because the cost to repair the vehicle after an incident may be relatively low.
In addition, you can save money by removing add-on benefits such as:
- Car hire.
- Roadside assistance.
- Gap insurance.
- New vehicle replacement.
- Windshield repair.
- Custom parts and equipment coverage.
Higher premiums are to be expected as insurers adjust their rates to align with inflation and the increased cost of vehicle repairs every year.
Your insurer will inform you ahead of your policy renewal date as to your new policy premium.
If they don’t, then be sure to get in touch with your insurer to check by how much your policy is likely to increase.
We also recommend that you check for cheaper rates on insurance quotes by using our free quote generator.
Simply go to the top of this page, enter your zip code and find cheap car insurance quotes in an instant.
How Do You Pay Your Car Insurance Premiums?
How you pay your car insurance premiums depends on your insurance provider, but most companies will allow you to pay in the following ways:
- By mailing in a check.
- Online through a portal on the insurer’s website.
- Via the insurer’s smartphone app.
- By setting up an automatic debit system.
When paying online, you will have the option to enter your credit card information, or that of your debit card.
You can usually also choose to link your checking account for an electronic funds transfer.
If your vehicle is insured by a company that also offers banking services, such as State Farm, your vehicle insurance account can usually be accessed via your online banking profile.
Remember that by setting up an automatic payment system, you can avoid late payment fees.
You Can Get Cheaper Car Insurance Today with CheapInsurance.com
Staying with the same company is not always the best idea.
By switching insurance companies and reviewing the quotes of many insurers instead of just one, you could save hundreds of dollars.
It’s important to analyze your policy’s wording to note any hidden costs in your insurance quote.
It’s also a good idea to review which payment plans are going to get you the cheapest car insurance rate.
Whether you pay your premium monthly, bi-annually, or annually—make sure that you check what your total annual premium cost will be.
If you are considering a new car insurance company, or want to compare prices, we make this very easy with our free quote generator.
All you need to do is head to the top of this page and enter your zip code. You will find a wide selection of insurance quotes to choose from.
Once you have an idea of the auto insurance premiums that you could be paying, it will be time for you to contact the insurers that are offering you the cheapest rates to get a formal quote.
Getting car insurance should be quick, simple, and stress-free, and you deserve to get the best insurance rates possible.
At CheapInsurance.com, we’ve got you covered!