For most drivers out there, monthly car insurance payment plans are the preferred option. After all, who will want to see their bank accounts suddenly dip by a few thousand dollars at the end of every year? However, there are times when monthly car insurance payments beat annual car insurance payments hands-down, and situations where annual car insurance payments are obvious better.
Monthly Car Insurance Payments: Pros and Cons
Being the most popular way drivers in the U.S. pay for their auto insurance premiums, it’s hard to imagine why it could be a bad option. Well, it isn’t! Let’s take a look at the good points of paying monthly car insurance premiums:
Feasibility – There are families, especially those that are less well-off, that can actually make a single huge payment at the end of every year. It makes more sense for them to pay off their premiums in small, bite-sized amounts.
Flexibility – There are other drivers that are not content with their current auto insurers. The fact remains that with monthly car insurance, you are able to “jump ships” quickly and conveniently, because you don’t have to wait for the end of the year to actually switch auto insurers
Putting insurers on “trial” – Sometimes, drivers prefer to pay monthly car insurance for a while to test the insurer; they want to make sure that the insurer delivers what was promised. These drivers will eventually switch to the annual car insurance payment plan, because of lower costs in the long run (we will explain this shortly).
However, there are bad points to paying monthly car insurance rates as well:
Higher amount paid in the long run – this is the main con of monthly insurance rates: drivers simply pay more than those who are paying annual auto insurance rates.
Loss of benefits – there are some benefits that are not available to drivers that are on monthly car insurance plans, because of the fear that these drivers will change insurers in the short run.
Annual Car Insurance Payments: Pros and Cons
The preferred option for drivers who wish to get the most discounts out of their preferred insurer, the annual car insurance payments has the following pros and cons:
Full spectrum of benefits – By going through this option, the driver will be granted access to all the benefits that are open to the insured. Insurers usually only grant such benefits to drivers who goes through annual car insurance payments.
Avoidance of interest – Although drives paying monthly car insurance payments give up a smaller sum at every payment, they will end up paying more because of the interest rates stacked onto each installment paid by the driver.
Lower risk of defaulting on payments – This might be seen as a minor issue, but it is more prevalent than you think. If you’re required to pay 12 times each year (for monthly car insurance) compared to once a year (for annual car insurance), you are bound to be at a higher risk of forgetting to pay for your insurance payments.
Of course, there are cons to the annual car insurance payments as well, such as inflexibility when changing insurers and a rather “all-in” approach when selecting insurers. Whatever choice you make, you’ll need to start by finding out the best quotes from insurers. You can start this by keying in your zip code in the text box at the top of the page.