Paying for car insurance can be a stressor for many people. Insurance companies try to help by offering lots of different payment methods and payment plans. Some are certainly better than others. Learn about the options available to you to determine which one is best for you.
Payment Methods Listed Best to Worst
- Paid in Full
Paying in full is the best option for a couple of reasons. Many insurance companies offer paid in full discounts, plus you can also save on monthly fees. Having your policy paid in full takes one bill off of your monthly list. It ensures you will not encounter a lapse in coverage.
- EFT
Electronic funds transfer is when the insurance company directly taps into your checking account, savings account, or credit card to withdraw your monthly payment. Often you avoid payments fees and possibly even get a discount for signing up for this payment method. Using your checking or savings account is a good option because you can set it and forget it, while with a credit card you will have to update your expiration date. Credit cards are nice because then your insurance payments can help you build up reward points on your credit card. Some companies do not offer payment by credit card as an option for EFT. Electronic funds transfer is the closest option to paying in full.
- Monthly Electronic, Credit, or Cash
Paying monthly is a common preference for many people. Monthly payment options include electronic check, credit card, or cash. Electronic check can be used as a onetime withdraw from your checking or savings account. Both electronic check and credit can be used to pay online, with your agent, or by calling your insurance carriers customer service number. Cash can be used to pay at most agencies. Just don't use your agency as a bank, it annoys insurance agents when they constantly have to break large bills.
Common Car Insurance Payment Plans
- Annual
Some insurance companies still offer annual insurance policies, but they are becoming rare. If you are a preferred driver risk, an annual policy is often the best policy. Being locked into an annual policy means your rates will not change for an entire year for any reason other than a change in vehicles. Paying in full means you will not have to think about your insurance payments for an entire year.
- Semi-annual
Paying in full on a semi-annual policy is also a good option. A semi-annual payment plan refers to a payment every six months. Annual policies can be paid semi-annually, however if you have a semi-annual policy your rates are up for change every six months.
- Quarterly
Paying every three months can help you avoid some payment fees, which makes it a worthwhile option.
- Monthly
Monthly payments are a nice option if you are tight on cash. Paying late is the biggest factor which can make this option a bad one. Pay on time and if at all possible opt for the electronic funds transfer.
- Two Months Down with a 5 Pay Plan
Two months down with a 5 pay plan is a common option when purchasing a new car insurance policy. Essentially, you get one month without a payment because you paid it at startup. Sometimes the month without a payment comes immediately after the policy is started, however, most of the time the month without a payment comes at the end of the policy term.
Selecting both the right payment method and payment plan is important when setting up your insurance policy. Changing your selection can be done at anytime. Most insurance companies allow you to pay extra at anytime usually slowing or reducing your payments. Take your car insurance seriously and prioritize it properly in your monthly budget.
