Whether you are a brand new auto insurance policy holder or a veteran policyholder, you might find yourself in a bind with the need to pay your premiums at the beginning of your policy period. It can be a larger amount than originally expected and present a problem with your budget. Paying monthly installments may be easier than choosing to pay the premium in one lump sum. On the other hand, paying your premium as one payment can take away the stress of paying monthly, knowing you’re covered and won’t be making any late payments or jeopardizing your policy in any way. In considering which option is best for you, here are some questions you may think of:

Can I have a month-to-month contract with my auto insurance?
Auto insurance policies are usually not offered as a month-to-month contract, but rather as a contract broken down into 3, 6, 12, and sometimes 24 month-long periods. During these harder economic times it can be difficult or not optional for a driver to pay the premium in one lump sum at the beginning of the policy, but rather pay the premium in equal installments. It may seem as though these customers are based on a month-to-month contract, but in reality they’re just paying month-to-month.

Why do auto insurance policies vary in length?
The reason auto insurance companies provide various contract lengths is because this gives them the opportunity to adjust rates as necessary when the policy needs to be renewed. If the company has been required to pay too many claims during a certain period of time, they will adjust rates to be higher when the policies are up for renewal. If the opposite occurs and the insurance company sees fit to lower rates, they will do so to please their customers who deserve it according to their driving record. The more frequently your auto insurance policy needs to be renewed, the more chances the company has to adjust your premium.

If you are looking for a shorter term policy than what is offered to you, you do have the option to pay for the policy and then cancel when you are finished by sending the auto insurance company a written documentation of cancellation. You’ll want to check with your state requirements before doing so, as all states only allow cancellation of a policy for certain reasons, and immediate proof of other auto insurance coverage is usually demanded. The company may reimburse you the remainder of the policy cost, but not without first charging you a cancellation fee.

How much will my auto insurance cost me?
Auto insurance premiums are different for every driver. Insurers take things such as age, driving record, and make and model of the car into consideration when deciding a driver’s premium. You can enter your information onto auto insurance comparison Web sites and get free quotes. While this quote is only an initial estimation, as long as you’ve entered your information in honestly and accurately it is probably about how much you’ll be paying for your auto insurance policy.

The auto insurance company usually prefers payment for the policy outright and at the beginning of the policy. If this exceeds your budget, you are given the chance to pay the total sum of the policy in equal installments throughout the period of the policy. As enticing as this may sound, this option will come with a fee added to each monthly payment. Compare this fee to your consequences of paying for the policy outright. Is it worth the extra $10 or so a month to pay the fee monthly or would it be financially better for you to pay for the policy upfront?

Is paying the premium in full a smarter choice?
There are pros and cons to each method of payment. Paying the total sum of your policy coverage upfront is beneficial in that you are 100% finished paying for the duration of your policy and no longer need to worry if you’ll be able to come up with the money for the remaining time on your policy. You have paid the bill and it will be the auto insurance company’s responsibility to help you if you need it. A con to paying it upfront would be the large sum of money required immediately.

Is making payments towards the premium better?
Payment for your auto insurance policy in monthly installments also has its pros and cons. As mentioned earlier the payment will be smaller and more manageable for most drivers as it is paid monthly. The cons include possible automatic cancellation for one missed or very late payment, which can result in a fee to reinstate your insurance. Another con is the monthly processing fee added onto the payment of monthly installments.

Are there any premiums based on how you drive instead of statistical evidence?
Recently, one auto insurance company has come out with a new device which you plug into a port on your car and the device sends reports to the insurer. These reports include your driving information such as the time of day you drive, how often you drive your car, and the speeds in which you drive your car. Less risky drivers will be given a lower premium. These types of programs are referred to as pay-as-you-drive auto insurance programs.

What is a down payment for an auto insurance premium?
If you choose to pay your premium in one full payment, you will not need to worry about any down payments. Auto insurance companies typically require you to pay a down payment for your policy if you are planning on paying month-to-month. This down payment is a percentage, around 25%, of the total amount of the policy. After this down payment is made, you will be required to pay the remaining balance in equal payments each month of the policy. When it comes time to renew your policy, you could be required to again give a down payment and then equal monthly payments thereafter.

Don’t for a minute think that the expense of auto insurance is unnecessary. Even if your rates break your bank account, it is illegal to drive without adequate auto insurance in every state. You will end up paying much more if you’re caught driving without it. Some things you can do to lower your auto insurance premium, whether it’s paid monthly or in one lump sum, are to take driving safety courses, keep your driving record clean of traffic violations and accidents for three years, increase your deductible, and keep a good credit score.

If you are considering switching your method of payment from monthly installments to one lump sum or vice versa, you’ll need to speak with your auto insurance company to make sure they allow the change. Some companies, in fear of a driver missing a monthly payment, do not allow short-term contracts such as a 3 or 6 month policy. Most companies offer a few different lengths of contracts, but it is better to check first. In the event the auto insurance company does not provide the length of contract you desire, you may want to consider switching to an insurance company that does have it.

As you become interested in searching for a new auto insurance company, rely on us at onlineautoinsurance.com to provide you with free quotes without needing your driver’s license number. We can help you compare insurance companies and their policies side-by-side by only filling out one questionnaire. We are happy to assist you in any way.

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