A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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Here's what you need to know...

  • Car insurance is a legal requirement in most states
  • Car insurance is also required by lenders and leasing companies
  • Many car insurance companies offer different payment plans to help make paying your premium easier on your budget

While many consider car insurance to be a necessary evil, it is important to realize that there are convenient payment options to pay this unending expense in our lives. In addition, you can shop around for an auto insurance premium that fits into your budget the best by using an online comparison tool. Before the internet, it was difficult and very time-consuming to shop around for auto insurance. This process involved many phone calls. Today, drivers like you have the convenience of the internet on their side which allows you to easily compare policies and prices to pick the one that is best for your driving and financial situation. Compare car insurance rates now by using our FREE tool above!

Car Insurance Expenses

Owning your own car is expensive. There are several expenses that should be considered when factoring in the cost of owning a car, such as:

  • Auto insurance premiums
  • Lease or loan payments
  • Gasoline
  • Regular maintenance, such as oil changes
  • Repairs and replacement parts, such as tires and breaks

However, insurance premiums are one of the most expensive pieces of the financial puzzle when it comes to owning a car. In fact, experts say that these rates are rising. For example, AAA out of Orlando, Florida reports that the average car insurance premium rate rose by 3.4 percent in the last year. This is congruent with a January 2016 report from the National Association of Insurance Commissioners, which found that the cost of auto insurance rose by 3.3 percent from 2012 to 2013. The places with the highest auto insurance rates were New Jersey, Washington DC, and New York.

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What Kind of Coverage am I Paying for?

It is important for drivers to realize that each state sets its own auto insurance requirements and minimum amount of coverage. Nearly every state requires some type of automobile insurance from its drivers. The price of your policy can vary depending on what is required by your state and what is required by your lender or leasing company. Driver should understand the different policy types available to them:

  • Bodily Injury Liability- Bodily injury liability coverage protects you in case you cause an accident and another party is injured or killed.
  • Property Damage Liability- Property damage liability also covers you in the event that you caused an accident, however, it applies to the damage of property, such as buildings, garage doors, utility poles, cars and other physical property.
  • Uninsured/Underinsured Motorist Coverage- Many states also require drivers to carry uninsured / underinsured motorist coverage. This covers and medical and other expenses if you are in an accident with another driver who does not have any auto insurance or has an adequate coverage.
  • Med Pay Coverage- Medical payments coverage, also known as med pay or MPC, pays for medical bills, and sometimes lost wages, in the event of an accident.
  • Collision Coverage- Collision coverage will pay for damage to your car if you have an accident with another car or happen to run into an object such as a tree, a brick wall, or a fire hydrant. This coverage is not generally required by law, however, your lender or leasing company will likely require it. You should be sure to check your contract to find out if you need to purchase this type of coverage.
  • Comprehensive Coverage- Comprehensive coverage is similar to collision in that it pays if your car is damaged, however it covers other risks not included in collision. Comprehensive coverage covers your car if it is stolen or damaged by fire, hail, flood, falling objects, explosions, and encounters with wildlife. Comprehensive is also an optional coverage type, however, you may be required to carry comprehensive coverage if you leave your vehicle or still have a loan on your vehicle.
  • Gap Coverage- Gap insurance is another kind of optional auto insurance policy. Gap insurance will pay for the difference between what is owed on the lease or loan of your vehicle and what your auto insurance company will pay if your car is considered to be totaled. Keep in mind that your auto insurance company will only pay what it considers to be fair market value of your vehicle. With the quick depreciation of vehicle values these days, it is wise to carry gap coverage.

If you can afford to pay for more than just the legal required minimum car insurance coverage, it is a good idea to do so to protect yourself financially.

Not being fully covered can leave you without a functioning vehicle.

It can also leave you holding thousands of dollars in medical bills, either for yourself or for another party that you were in an accident with. If you cause an accident and the financial consequences are beyond what your auto insurance policy covers, the other parties can legally come after your assets or even future wages to pay for their expenses in relation to the accident that you caused.

Payment Options

While there are many factors about your car insurance premium that you cannot control, such as what kind of coverage your state legally requires of you or your contractual agreement with your lender, most car insurance companies do allow you some flexibility in paying your car insurance premiums. For instance, most car insurance companies allow flexible payment plans in the forms of:

  • Paying a premium in full each year
  • Paying a six month premium at one time
  • Paying your premium in a quarterly installment plan
  • Paying your premium in monthly installments over a six or a 12 month period

How often you have to pay your car insurance premiums will be based on your policy and the company that you have your policy with. Most car insurance companies will allow you to choose from several or all of the payment plan options above. However, be aware that paying your premium in monthly or quarterly installments could lead to additional fees and the potential that you will forget to pay your premium and the risk that your policy could be unexpectedly canceled.

While car insurance can be a major expense when owning your own vehicle, there are ways to decrease the cost and make paying your premium more manageable. Being able to choose a payment plan that works for you can help you to ensure that your car insurance premium is being paid when it needs to be paid, whether it is monthly, quarterly, bi-annually, or annually. To further decrease the price you pay for auto insurance, consider using an online auto insurance rate calculator or comparison tool. These easy to use tools make it simple for you to compare quotes from several different auto insurance companies in order to choose a policy that fits your needs and your budget. Start comparing car insurance rates now by entering your zip code in our FREE tool below!