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Quick citation guide Select a citation to automatically copy to clipboard.APA: Gibson, J. (2024, September 10). Should you pay car insurance in installments? Bankrate. Retrieved September 10, 2024, from https://www.bankrate.com/insurance/car/pay-car-insurance-in-installments/
Copied to clipboard!MLA: Gibson, Jessica. "Should you pay car insurance in installments?" Bankrate. 10 September 2024, https://www.bankrate.com/insurance/car/pay-car-insurance-in-installments/.
Copied to clipboard!Chicago: Gibson, Jessica. "Should you pay car insurance in installments?" Bankrate. September 10, 2024. https://www.bankrate.com/insurance/car/pay-car-insurance-in-installments/.
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Written by
Jessica Gibson
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Maggie Kempken
Maggie Kempken is an insurance editor for Bankrate. She helps manage the creation of insurance content that meets the highest quality standards for accuracy and clarity to help Bankrate readers navigate complex information about home, auto and life insurance. She also focuses on ensuring that Bankrate’s insurance content represents and adheres to the Bankrate brand.
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Mark Friedlander
Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance.
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When you purchase car insurance, you usually get to decide whether you want to pay for your policy in full or in installments. Although you can typically get a discount for paying your policy in full, not everyone can afford to do that. But while opting for installments might be more affordable initially, it could also cost you a bit more in the long run due to additional fees. So do you pay car insurance monthly or is a lump sum a better option? Bankrate’s insurance editorial team breaks down both car insurance payment methods so you can determine what will work best for your budget.
Should you pay your car insurance in full or in monthly installments? The answer is: it depends. Your financial situation, how you prefer to pay your bills and how likely you are to switch companies midterm are all determining factors when choosing a car insurance payment plan.
If paying your premium in full causes financial hardship, you may want to break your premium into manageable chunks. On average, drivers in the U.S. spend $2,348 per year for a full coverage policy (as of September 2024), so car insurance is a hefty bill for many people. You don’t want to pay your premium in full only to need that money later for an unexpected expense, so it helps to consider your full financial picture when making your decision.
Installment fees or service charges are another consideration when choosing a car insurance payment plan. Credit card companies and financial institutions usually charge a fee to process payments, and many insurance companies recoup this by adding an installment fee to your monthly bill. Typically, these installment fees are small, but they are also unregulated. An insurance company can set its own installment fee amount, even if the installment fee is higher than what the company is being charged to process your payment.
Some insurance companies offer a pay-in-full discount that can help make paying your premium as a lump sum more beneficial. If you can afford to pay your premium upfront and your company provides a discount for doing so, an annual payment plan might be a good choice for you. However, if you can’t afford to pay the annual premium in cash or from a debit account and will be relying on a credit card, consider the added cost of interest payments. Paying with a credit card will likely cut into any money you save by paying your premium at once.
Deciding whether you want to pay in installments or as a lump sum also depends on how you like to pay your bills. Some people find it inconvenient to pay a monthly bill and would instead prefer to make one payment for the entire year. Others may find it difficult to remember to pay their annual premium since it only comes up once a year. Whichever option you choose, it’s essential to make your insurance payment on time to avoid a lapse in coverage and possible late payment fees.
Finally, think about how likely it is that you will switch insurance companies in the middle of your policy term before choosing a payment plan. It can be easier to cancel your policy midterm if you are on a monthly payment plan because of how policy refunds are structured. Under this arrangement, you can always shop around for cheaper car insurance if you need.
When you cancel a policy midterm, your insurance company will either give you a prorated refund or a prorated bill, depending on where you are in your billing cycle. Because you paid in advance, your refund amount will likely be larger if you’re on an annual payment plan. Some companies can take up to 14 business days to issue your refund, tying up what could be a substantial amount of money. This refund process could create difficulties in coming up with your first payment for a policy with a new car insurance company.
