Most auto insurers will give you the option to pay for coverage through monthly premiums rather than forcing you to make a single large, upfront payment. Depending on your financial situation, need for planning flexibility, and other factors, making the wrong choice can have long-term consequences.
This article will offer a road map for navigating your auto insurance payment schedule. Pro: Easier On Your Monthly Budget
Your monthly insurance payments will fit nicely in your budget. The payments represent an expected outflow that is already allocated in your financial plan.
Paying your auto insurance premiums on a monthly schedule increases the paperwork you’ll be forced to manage. The funds are drafted directly from your checking account on a predefined schedule. Pro: Provides More Liquidity
Monthly car insurance payments provide valuable liquidity. If you were forced to pay several hundreds of dollars upfront for an annual car insurance policy, you might lose the liquidity necessary to make your monthly investments.
Con: Includes Processing Fees
Most auto insurers will charge a small monthly fee to process your payments each month. If funds are unlimited, the experts are correct. This small fee may be worthwhile considering the liquidity this arrangement offers.
Pro: More Flexibility
Auto insurers are constantly trying to gain market share. You might be able to get equal coverage for less money through a competitive auto insurance company. If you cancel your car insurance policy after paying upfront, you’ll receive a pro-rated balance from your current insurer. It’s much simpler to cancel your coverage and switch providers when you’re paying for your insurance coverage monthly.
Choosing The Right Payment Schedule
Review your monthly budget. A little upfront planning can help you avoid headaches down the road.