When you purchase a car insurance policy, you typically have the option to pay monthly or annual premiums. There are benefits and downsides to both, so it is important to make the right decision for you and your finances.
Upsides of Paying Annually
Paying annually generally means paying a larger lump sum near the beginning of the year. This can help you save throughout the year by not giving you a monthly bill, and there are often discounts available for drivers who decide to pay their car insurance premiums all at once.
It is also useful so that you have less of a change to accidentally miss or skip payments. Even setting up an auto draft on your monthly premiums can sometimes lead to a mistake or double payment. Having a single, annual bill makes it less likely that you will be dropped because you missed a monthly payment.
This may be beneficial for drivers who can afford to pay larger sums out of pocket and do not want money taken from their account every month.
Upsides to Paying Monthly
While monthly premiums do require you to pay a bill on time each month, they also have a lot of benefits. Paying monthly can help you keep track of changes in your premiums. When you pay yearly, you may not be able to see how much your rates are fluctuating throughout the year and you could be surprised by unexpected jumps in prices. This also allows you to shop for car insurance throughout the year if you are not happy with how your premiums are changing. You can catch your insurance agent while they’re less busy to fix a problem rather than waiting until the start of the year, when many agents are the busiest.
In the end, it is your decision to choose what type of insurance policy you would like. There are benefits and downsides to paying both annually and monthly. While paying monthly is the most common form of car insurance premiums, paying annually is still a valid choice for some.
Speak with your insurance agent and a financial advisor before settling on a policy. It is important that you choose a payment method that is right for your budget and your lifestyle so that you don’t accidentally have a lapse in coverage or even risk a cancelled policy.