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How often do you pay car insurance premiums?

Here's what you need to know...
  • There are several payment plan options you can choose from for car insurance
  • The most important thing is that you do not let your coverage lapse
  • You’ll save the most money by choosing to pay annually, but it can be difficult to be disciplined enough to have that money ready when it’s due

Owning a vehicle comes with a huge set of responsibilities. Not only do you have to pay your car payment and title fees, you also have to worry about regular car ownership expenses for maintenance and insurance coverage.

When you put off maintaining your vehicle, there is a strong chance that the vehicle will suffer a premature breakdown, but when you fail to maintain your insurance coverage, you could face serious civil and criminal penalties in court.

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The only way to maintain continuous car insurance coverage and avoid these stiff penalties is to pay your premiums regularly.

How often you are required to pay for your insurance depends entirely upon the pay schedule that you choose and the type of policy that you carry.

Policy Terms: 6-month terms vs. 12-month terms

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Insurance companies will sell one of two types of standard car insurance policies: 6-month terms and annual terms. When you are shopping for coverage and would like to know how often payments will be due, you must differentiate the two policies first.

In the insurance industry, the policy term is the period of time that the policy remains in effect and the coverage remains valid. The term will have a start date and an end date.

The span of time between the two will either be 6 months or 12 months. Once the term is up, the policy will be up for renewal.

Why do most insurers offer 6-month terms?

While the length of the policy term will vary from company to company, a vast majority of the larger insurers in the marketplace will only offer 6-month policies. The primary reason for this is because 6-month terms are beneficial to the carrier.

When the carrier underwrites a policy twice per year, they are able to raise premiums for infractions and at-fault accidents sooner than they would if it were an annual policy.

In the eyes of the insurer, the more opportunities to raise premiums the better. With this being said, there are still a select few companies that will continue to offer their policyholders the option to buy a 12-month term.

What are the benefits of 12-month ?

One of the biggest advantages of buying a 12-month car insurance is that your rates will be locked in for an entire year.

As long as you do not make any changes to your vehicles, drivers, usage or coverage options, the policy premiums will remain the same until your term comes up for renewal.

Having locked in rates for 12 months is advantageous because there is a delay in when your policy will be underwritten for renewal. Instead of getting put under the magnifying glass twice each year, you will only be assessed once.

If you have a moving violation just a month into your term, the insurer will not see this or charge for it for 11 months. This is also true when you have an at-fault accident that is considered to be chargeable.

If you pay your premiums in full and you tend to be the forgetful type, you will only need to remember one date with an annual policy.

While insurers do send renewal notices at least 30 to 45 days before a renewal is processed, it is common for policyholders to overlook due dates. This can lead to a missed payment and then a lapse in coverage.

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Payment Options: Choosing a Payment Schedule

Now that you have brushed up on policy terms, the next step is choosing your own customized payment schedule. The options also vary from company to company and can depend upon the length of term that you carry.

Here are some of the most common payment options that you have:

– Paid in Full

For those who can afford to pay for premiums upfront, choosing a paid in full payment schedule is best. In doing this, you will receive an invoice only once per term.

You do not have to worry about installment payments or automatic drafts because the bill will be paid off. You also do not have to worry about lapses during the term or the assessment of senseless policy fees.

Many insurers will offer their customers discounts for paying in full for 6 months or 12 months at a time. You should ask your agent how much the discount is to determine if it is worth skipping the installment option to pay all at once.

– Quarterly Installments

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Consumers who cannot afford to pay in full but who prefer not to pay monthly can select a quarterly installment. In doing this, you will pay your premiums every 3 months.

You will still avoid some of the service fees that the insurer charges to clients with monthly schedules, but you do not have to shovel out a small fortune all at once.

– Monthly Payments with Automatic Draft

If paying monthly is best for your budget, you can select an automatic payment option to reduce the likelihood of missing a payment.

You will still have a payment due on the same date each month, but you have peace of mind in knowing that the payment will come out of your account without you taking action.

What is great about this option is that you can get a discount just for having payments setup for electronic transfer.

Some insurers will even let you select the best date for the draft, which offers you greater flexibility.

– Skip a Month Payment Plans

Not all companies offer a skip a month plan, but there are some carriers that do. Instead of dividing payments into equal payments for the term, the company will charge the customer for just 5 out of the 6 months.

The payment may be higher throughout the term, but you will go without a payment for the last month before your renewal. Consumers who need to pay monthly but who prefer to skip a month in payments should consider these plans.

As you can see, there are several different payment options and schedules you can choose from. It is important to choose an insurer that offers a plan that works for you.

If you are shopping for coverage, start by using our FREE rate comparison tool by entering your zip code below and equip yourself with the knowledge that you need to find a company that offers the best rates in your class with the best payment options for your personal budget.

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