Can you pay car insurance yearly?
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UPDATED: Oct 26, 2021
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- You can pay for insurance annually
- Yearly payments can be expensive, but it also can be cheaper in the long run
- There are other payment options available that may be more affordable
Most insurance companies offer several ways to make your annual premium payments. Many people start a policy and choose to pay monthly for convenience and never reconsider their payment options. However, paying yearly may yield savings. Insurance typically comes in periods of a year or 6 months. This is the period your rate is locked in for. After it expires, your rate could go up or down depending on activity during your coverage period. If you miss payments and let your insurance policy lapse, rates could change sooner.
Providers will typically slash your total cost when you pay up front by eliminating extra administrative fees. Also, some providers will allow you to pay for your remaining premiums mid-policy term to receive pro-rated savings. Bottom line: check with your providers for ways to save.
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Why should you consider paying your insurance quote all at once?
The biggest benefit of paying yearly is the savings. Car insurance companies like when you pay ahead for such a long period because it guarantees that they will get their money and that you won’t lapse on your coverage. It also reduces their financial burden because they don’t have to pay someone to oversee your payment plan. So they pass the savings onto you in the form of fewer fees and sometimes lower rates on collision coverage and more.
Some companies offer discounts up to 20 percent off your premium. By paying yearly, you can also avoid pesky installment fees. Plus, you’re locked in at a rate that is guaranteed not to change over a 12-month period. If you cannot afford to pay all at once, it’s fine to use smaller payment options. Putting your annual premium on a credit card and then paying interest defeats the purpose of paying annual premiums at once in many cases.
Another benefit to paying yearly is peace of mind. Once you pay, you don’t have to remember to pay a monthly payment on time or have to worry about any late payments.
An annual payment is a great alternative, especially for those who have trouble keeping up with monthly payments.
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What are my other options to pay the average cost of auto insurance?
While paying yearly is a great option for some, it can be more difficult for others. Because you are paying for an entire year up front, you will be paying a large lump sum, which could easily be thousands of dollars. Whether you can comfortably afford a 12-month option or not should be based on your lifestyle and spending habits. This is more severe when your coverage limits are higher or you have tickets and insurance claims on your record. Someone who could afford to pay an annual premium at once with a clean driving record might struggle if they’ve recently added a teen driver or had an accident. You should always base your payment choices on your financial situation.
Luckily, most companies offer other payment options — which provides you with more flexibility. Besides the 12-month option is the six-month, paid-in-full policy, which can be advantageous if you want to evaluate your policy needs over time.
Splitting up the payment over six months is not as big of a financial impact when comparing it with the 12-month option.
The monthly option is one of the most popular policy terms among motorists. Even though the monthly option is more expensive in the long run, the monthly payment is more manageable on a short-term basis.
Another advantage of opting for a monthly payment, is you have the ability to be more flexible in your options. If you want to switch to another insurance company, you can do it almost at the drop of a hat. If you pay annually, you would get your money back, but the insurance company would have a certain amount of processing time to get it back to you.
What kind of auto insurance do I need?
Whether you have yearly, semi-annual, or monthly payments, the price tag on your payment also depends on what kind of coverage you opt for.
Although each state is different, you can expect to have liability insurance requirement. Liability insurance is set in place to protect you in an accident. There are two types of liability insurance:
- Bodily Injury Liability – Covers the cost of injuries to the other party in the event that you cause an accident. This could include costs resulting from emergency aid at the scene, hospital bills, loss of income, and even funeral costs.
- Property Damage Liability – Covers the cost of damage to someone else’s vehicle or property that you are responsible for damaging in an accident.
It is important to note that liability insurance does not cover damages to you or your property in an accident, which is why it is important to discover other types of insurance that may be beneficial to your needs. State minimums also cover only small amounts. If you’re in a serious accident, especially one with serious injuries, those limits get eaten up quickly. If you want to protect your car and yourself as a driver, some other insurances include:
Once you decide on what types of insurance and the limits of protection you need, then you can get quotes for yearly, monthly or semi-annual insurance.
If you are currently paying a monthly payment, but you know you can afford a one-time yearly payment, check out your options and see what discounts may apply to you.
Getting multiple quotes online will help you find the best deals. Enter your zip code in our FREE comparison tool below!