Buying car insurance is a big decision. You’re looking for coverage that fits your needs, but you’re also concerned about sticking to a budget.
That’s why insurance carriers give you the choice to pay annually, monthly, or even twice yearly, so you can select the method that best fits your financial needs.
For many, annual payments are a convenient option, but before deciding to pay your premium up front, you might want to consider these pros and cons.
Pros of Annual Auto Insurance Premium Payments
Consumers who opt to pay annually for insurance coverage are those who are looking for cost savings and simplicity. The pros include:
- Convenience. For time-challenged individuals, paying insurance premiums on a yearly basis is more convenient than carving out free moments to send in monthly payments.
- Peace of Mind. By paying annually, you don’t have to worry about missing a monthly payment and running into a lapse of coverage, possibly at a time when you need it most.
- Lower Premiums. With annual payments, insurers save money on bill processing and pass the savings on to you. Lifehacker estimates that you can easily save as much as $120 per year on auto insurance by paying once annually.
Premium savings, convenience and peace of mind—annual payments seem to have it all wrapped up, but before you click the payment-processing link, let’s take a look at the other side of paying up front for coverage.
Cons of Annual Insurance Payments
Despite the fact that annual payments may pad your wallet with some extra cash, paying once a year isn’t for everyone. Some of the cons related to annual payments include the following:
- More Difficult to Budget: Unless you’ve got some wiggle room in your yearly budget, or are disciplined about setting aside money each month for your insurance, annual payments may come as a jolt to your wallet when your policy comes due for renewal.
- Easy to Forget: With monthly payments, you expect to write a check or make an electronic payment every month for your insurance. You become accustomed to that reoccurring expense, but when paying once a year, the same expectations don’t apply. It can be easy to forget to pay your premium, leaving you vulnerable to lapses in coverage.
- Less Flexibility. When you pay annually, you have less flexibility with your budget than when you pay monthly. If an emergency comes up the same month your auto insurance is due for an annual payment, you could find yourself in financial hot water.
Making yearly payments is a convenient and more cost-effective option when it comes to paying your insurance coverage, but deciding how to make payments should be based on what works for your budget and lifestyle.
To get the most bang for your insurance buck, be sure to check your coverage frequently to make sure you’re receiving the best price for the insurance you need. Getting annual rates from a variety of carriers is a good way to make sure you aren’t paying too much.