Monthly Car Insurance

Reader’s Question:

What is better, car insurance monthly payments or annual payments?

Dina

Jackson MS

Car insurance companies provide different modes of payment when you buy from them to allow for greater financial flexibility on the buyer’s end. The payments can be annually, quarterly, or monthly. Each mode of payment has its own advantages and disadvantages. Since you only want to know about car insurance monthly payments and annual payments, we’ll stick with them.

Annual payments are advantageous on both the company’s and insured’s sides. On the part of the insurance company, that mean collecting the premium at once and use it for investment purposes. They would only need to issue one receipt and does not need to call the client to remind him of his payments. On the client’s side, an annual payment allows him to pay for a year-long coverage. He does not need to think of the car insurance payment the rest of the year. Moreover, the annual premium payment is lower compared to car insurance monthly payments. This is because interest is counted in accordance to the number of times that a premium is paid. There is an interest payment to since the company’s exposure is higher when a client does not pay annually.

In terms of car insurance monthly payments, the main advantage is, of course, having to pay for only a fraction of the entire premium. This is quite low and would not be hard on the budget. The main disadvantages though are many. One, the client has to remember paying monthly lest the coverage will lapse. Second, his overall premium payment is higher. Third, premium payments may not be paid if he suddenly loses his job or finds himself in an emergency.

As you can see, there are more advantages to paying annually despite the fact that it could be quite substantial. But if you have the means, I greatly encourage you to pay annually.