Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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UPDATED: Sep 14, 2021

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Important facts to know...

  • When you buy insurance, the carrier will collect a minimum amount that will be required to activate the coverage
  • Most carriers will activate a policy as long as the applicant pays one or two months of their premium upfront
  • If you are on a payment plan and you decide that you want to pay off your policy early, you can just pay the balance
  • Be sure to notify your insurer you’re paying full if you have automatic payments drafted from your bank account
  • You can only pay the current term’s premiums. It’s not possible to pay up front when there’s no renewal bill

Auto insurance is a contract that you can pay for monthly, quarterly, or semi-annually. The less work you make your insurance company do, the more likely they are to give you discounts. In the case of payment plans, a payment plan with fewer payments helps customers avoid extra administrative charges. This is true for many auto insurance companies and regardless of the type of insurance you have.

Since most of the bigger and more respected carriers in the industry give their clients options to set up payment plans, finding a due date and billing cycle that fits your paycheck schedule isn’t all that difficult. Some carriers even prefer you pay your entire auto insurance premium up front. This way, they know you’re paid up and committed.

If you start paying your insurance monthly and your finances change, there’s nothing written in stone that says you can’t change your cycle to increase your payment amount. In fact, the carrier would love to collect more premiums up front to cover expenses and put away in reserves.

Some carriers even offer their customers who pay in full a discount just for paying all at once.

Here’s what you need to know about paying your coverage off early.

If you are also looking for the best auto insurance rates, start comparison shopping by entering your ZIP code above!

What are the most common payment plan installment options?

Traditional insurance products were designed to be paid in full. Many of the original insurers would only accept full payments for the 6-month or 12-month terms that were offered. Monthly payment plans and other options were developed to make an insurance policy more accessible to average consumers.

If a change was made to the insurance, the company would bill the client for the additional premiums all at once. Things have really changed to make paying premiums more affordable. State minimum liability coverage is generally cheap. When you start adding optional coverage like collision coverage, your total premium can rise quickly.

Now, insurance companies offer more convenient payment options for individuals who can’t afford to pay all of their premiums at once.

With premiums rising by an average of 3.3 percent each year, paying in installments is a more reasonable option for average households.

Here are the installment options many company offers:

  • Monthly – once every month
  • Automatic EFT Monthly – automatic draft made once each month
  • Quarterly – once every three months
  • Semi-annually – once every six months
  • 5-Pay Plan –  two months down and five monthly payments

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Do you pay for your coverage before it’s used?

When you pay for a service rather than a tangible good, the service provider can either bill you upfront or after the service has been rendered.

When you’re paying for services like cable TV, the Internet, water, and electricity, you have to be billed after you’ve used the service so that the provider knows how much to charge you.

It doesn’t work this way with auto insurance.

With insurance, you pay the same amount each month for your coverage. If they charge you after, they might have trouble recovering costs if a borrower wants to cancel. If they bill ahead of time, they may have to return some of the money if an insured chooses to cancel their policy, but they don’t have to chase the insured down. They also don’t have to worry about a credit card being invalid when premiums are up in the air.

Since it’s a service that you don’t want to use your service, the carrier has no choice but to charge you before it’s used.

Insurance companies will bill you upfront instead of asking you to pay after the coverage has been afforded.

How do you find out the balance of your policy in the middle of the term?

If you set up a monthly installment plan with your insurer, you can change it at any time during the term except for when there’s only a month’s worth of premiums left. Many insurance companies now have apps you can use on your phone or other mobile device. This allows you to check your payment plan and how much you have left in the cycle at any time.

Of course, if you’re close to renewal, you can only see so far ahead. Your annual premium will often change as tickets and accidents fall off your driving record.

If you have money that you’re holding onto, paying the rest of the balance off could be the best option for you.

When you want to pay off the policy, finding out the balance of your premiums isn’t too difficult.

One thing that you can do is look at your latest invoice. This invoice will show the balance that’s due for your installment and how much is left on the policy to pay it off fully.

You can also check your account online or call your agent and ask how much you need to pay to pay the policy off.

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How do you pay off your insurance policy?

You would submit a payment to pay the car insurance early much like you would pay a normal payment.

If you can make payments by phone without being charged a fee, make your payment by phone. You can also mail in a payment or submit your payment online.

For people who like to see their agent, going in person to pay by check, credit, or cash is an option.

Many people pay their premiums entirely online or on a mobile app with a credit card, Paypal, or other methods depending on the insurance provider.

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What happens with auto payments already set up?

EFT payments won’t automatically stop if your payment is scheduled in the next three to five days. Once your premium is fully paid, though, future payments stop. Any overpayment can be credited back or applied to your next premium. Generally, though, you can take your next payment off the total if you’re close or wait until after the auto pay goes through to pay the rest.

Be sure to tell your agent your intentions before you send in a full payment. The last thing you need to happen is for your EFT payment to go through right around the same time your full payment is processed. An insurance agent can advise you on your options.

You’ll still get a refund for the overpayment, but it can still be a hassle.

Can I pay up front for more than a year?

If you’re about to leave the country or you don’t want to have to worry about future premiums, you might be interested in paying up front longer than your term.

Unfortunately, unless your policy is about to renew, you can’t pay for more than the year.

Your renewal will be processed sometime between 30 and 45 days before the term is set to end. Your premiums can and generally do change after the contract period is up. So you cannot get insurance quotes for multiple years at a time or make payment for more than that period.

Are there benefits to paying in full?

Before you pay hundreds or ever thousands to pay your car insurance off early you need to know the benefits.

For some, it’s benefit enough knowing that you don’t have a payment looming over your head.

If you’re good at keeping track, the benefit is that you will save money off of the billing charges and you may even get a pay-in-full discount.

Make sure that you check to see if you’re paying competitive rates before you pay your premiums off early.

If you think that your rates are too high, you can shop around and compare rates before you go about submitting a full payment. To shop around in a time crunch, use an online tool to get a handful of instant quotes and make your decision.

Start comparison shopping today and compare with our FREE online quote tool! Enter your ZIP code to get started!

References:

  1. https://www.thebalance.com/what-is-electronic-funds-transfer-527053
  2. https://www.thebalance.com/what-is-an-insurance-renewal-527419
  3. http://www.dfs.ny.gov/insurance/ogco2000/rg007271.htm
  4. http://www.insurance.ca.gov/01-consumers/105-type/95-guides/01-auto/auto101.cfm
  5. http://www.iii.org/fact-statistic/auto-insurance
  6. http://www.consumer-action.org/index.php/alerts/articles/insurance_premium_installment_fees
  7. https://www.thebalance.com/best-ways-to-make-your-car-insurance-payment-527399
  8. http://www.rmiia.org/auto/steering_through_your_auto_policy/Cost_of_Auto_Insurance.asp
  9. http://www.edmunds.com/car-reviews/top-10/top-10-ways-to-lower-your-car-insurance-bill.html
  10. https://www.thebalance.com/what-is-a-car-insurance-grace-period-527413
  11. http://www.myjourneytomillions.com/articles/paying-car-insurance-full-really-worth-savings/