Auto insurance buyers who are looking for the best way to budget for their payments may be wondering if they need to pay for auto insurance coverage in advance. While a policyholder can pay for coverage for the entire term in advance, insurance companies do offer other payment options to their customers.
Consumers need to be aware that paying for auto insurance in installments may mean paying extra administrative or other fees to cover the higher cost of processing multiple payments. Each person buying the policy will need to consider whether the convenience of paying for coverage over time is worth the added expense which may come with this choice.
Auto Insurance Payment Options
Each auto insurance company decides on its payment policies independently. All of them allow a policyholder to pay for the full amount of his or her premium when the policy is issued. Since not all consumers can afford to pay for six or 12 months’ worth of coverage at once, companies offer other options to their customers.
An auto insurance buyer who chooses to pay for his or her coverage in full may be given a discount, depending on the insurance company involved. New customers would need to make this payment by the policy effective date. If the policy is up for renewal, the payment must be made at least one business day before the renewal date.
Another option available to auto insurance buyers is a budget payment plan. With this method, a driver can pay for his or her auto insurance coverage in two or more installments. One example of the way that this payment method can be set up is that the policyholder pays 50 percent of the premium by the policy effective date. The second installment for the remaining 50 percent of the premium is due 30 days after the policy effective date. The policyholder may be charged an administration fee on top of the face value of the premium to reflect the cost of processing multiple payments.
Some drivers prefer to pay their auto insurance on a monthly basis. This choice can help with cash flow because the total amount payable for coverage is spread out over six or 12 months. The insurance company will take the amount of the premium for the term requested, add an administrative fee, and then divide this amount by the number of months in the term to determine what the monthly payments would be. A policyholder may need to make a down payment to the insurance company if he or she wishes to use this payment option.
Auto Insurance Payment Methods
Customers can choose to have their premium amount automatically withdrawn from their bank account on an agreed-upon day each month. Insurers also offer the option of paying the premium by telephone for online banking. Paying by mail or going to a customer service center to make a payment in person is another option available to auto insurance buyers.