You have many decisions when purchasing a new car insurance policy. From determining your coverage to selecting a deductible amount, policyholders must review their new policy diligently, especially regarding your premium. Whether you decide on monthly installments or to pay your insurance premium in full, you may wonder what the pros and cons of each choice are.
Although paying in installments can help your wallet, paying an auto insurance premium in full can help lower your annual costs. So, if you’re having difficulty deciding your payment method, this blog will cover the advantages of paying in full and what to consider before you do.
How Often Do I Have to Pay for Car Insurance?
Car insurance providers allow you to pay for your premium in several ways. However, you’ll typically pay less overall the fewer payments you make. That’s because fewer payments mean fewer associated fees. As a quick recap, most insurance payments for 6- and 12-month policies typically follow one of these payment structures:
- Premium payment in full: Most insurers will allow you to pay your premium in full when signing up for a new car insurance policy. Following this method, drivers make one annual payment for 12-month policies or two annual payments for 6-month policies.
- Split or quarterly installments: Some insurers may offer a middle ground between full payments and monthly installments if paying in full is a little out of the budget. For example, you may have the option to split your payments into quarterly installments. This means making four total payments for annual policies or two payments for 6-month policies.
- Monthly installments: Depending on your finances, committing to monthly payments may have the least impact on your monthly budget. Keep in mind that although monthly installments may be smaller, they can include additional fees or interest if your payments are tied to a finance plan. Over time, this could cost you more.
What Are the Pros of Paying My Insurance Premium in Full?
Potential to Save Annually
One of the main benefits of paying your car insurance premium in full is receiving a “paid in full” discount. This discount rewards policyholders who can pay their total premium at signing. Doing so could get you the best deal on your rate, but it can also free you from having to remember to pay your bill on time.
But what if your insurer doesn’t offer a paid-in-full discount? In that scenario, saving in the long run is still possible. The reason is because insurers may charge you additional fees—such as monthly installment fees—just for splitting up your payments. Sure, these may seem small every month, but they can quickly add up over a year.
Fewer Bills Throughout the Year
Another advantage to paying your car insurance in full at signing is that you won’t have to worry about another insurance bill for another year or six months, depending on your policy.
Some policyholders prefer the convenience of a one-time payment over having to risk missing a payment, which could have negative effects like late fees. No matter how you manage your bills, paying your premium in full will reduce the number of insurance payments you make in a year. In addition, fewer monthly expenses could help you allocate funds throughout the year for when it’s time to renew your policy.
Locking in Your Rates
When you pay in full, you ensure your coverage rates won’t increase* during your policy’s term (assuming you don’t adjust coverage or add any vehicles). This could be a preferred option for parents with young drivers or young adults as it limits the amount of potential rate increases per year. For example, suppose you can secure an annual policy and pay for it in full. In that case, you don’t have to worry about a potential increase six months later as you would if you only purchased a 6-month policy.
*Disclaimer: Although your rate will not increase during the duration of your policy, filing a claim or getting into an accident could result in increased rates at renewal.
What to Know When Paying for Car Insurance in Full
As mentioned, paying for your premium in full has various advantages. However, there are some drawbacks to doing so that are important to consider.
Your Ability to Shop Rates
Paying for your insurance premium in full is a great way to lock in your rates for your term, but it can affect your ability to change carriers or to take advantage of lower rates from another insurer. Yes, you’ll still be able to cancel in most situations (after settling any early cancellation fees). However, getting a refund may take longer than if you were on a monthly installment schedule.
Consider the Amount You’ll Save
Some insurance companies do offer discounted rates for individuals who pay for their coverage in full, but discounts can vary significantly between insurers. When determining which payment method to choose, consider how much of a difference the discount can have. For example, if you’ll save less than $100 total, paying in full upfront may not be worth the added financial burden.
Availability of Annual Policies
Keep in mind that 6-month policies are the industry’s standard. While it is possible to find 12-month policies, they may not be available everywhere. Plus, even if an insurer does offer annual policies, there is no guarantee that you’ll receive an incentive for paying in full at signing.
Additional Financial Strain
Last but not least, it’s essential to consider how paying a premium in full will affect your finances. Although it is possible to do so, it could cause financial strain depending on your monthly income and current standing. If you find yourself in this situation, monthly installments can help offset the effects of a large purchase.
Speak with a California Auto Insurance Specialist
Even if you can’t pay your insurance in full, you can lower your premium in other ways. At Orion Indemnity, we offer various discounts you may already qualify for just for being you. We specialize in providing quality car insurance coverage tailored for California drivers. To learn more about how Orion Indemnity can help you with your insurance needs, call us today at (833) 336-7466.
The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.
