There are a lot of questions that come up during the process of choosing the best auto insurance. From whether you should include comprehensive coverage to deductible options to rental reimbursement, the options add up quickly.
There's just one more important thing to figure out: how often do you plan to pay your car insurance premium?
When faced with the challenge of how often to pay your premium, there are a few questions to answer:
- What is a car insurance premium?
- How often do you have to pay for car insurance?
- Which car insurance payment plan is right for you?
WHAT IS A CAR INSURANCE PREMIUM?
Once you choose a quality car insurance provider, you’ll agree to coverage including liability and collision insurance for your vehicle. In exchange for insurance coverage, you’ll be responsible for a premium — or payment.
Your premium can be paid in a number of different ways, but the premium amount, itself, is also unique to you.
How are car insurance premiums calculated?
There are a number of factors used when your car insurance rate or premium is calculated. Ultimately, car insurance companies are attempting to balance the amount you are charged with how likely you are to need an insurance claim paid out.
While each carrier uses its own calculation, here are the considerations many providers make:
- Personal demographics: Age, gender, and geographic location
- Car type: The make, model, year, and even color of your vehicle is taken into account.
- Credit: Your credit history has a lot to do with how likely you are to pay your debt, so this is important for assessing how likely you’ll be to maintain your premium payments, though some states have started banning the use of credit when determining rates.
- Driving history: The more responsible you’ve been while driving, the better your rates will be. In other words, with little to no at-fault accidents or citations, you’ll enjoy better rates.
- Additional coverage: Additional coverage options, like roadside assistance or rental reimbursement, will add costs to your premium.
- Discounts: Discounts are provided for proactive driving courses, paying in advance, and more, depending on the carrier.
- Additional drivers: More drivers (with potentially poor driving history) will affect your overall premium.
HOW OFTEN DO YOU HAVE TO PAY FOR CAR INSURANCE?
Every car insurance company is different, but most will have different payment options available. In general, the more you pay upfront (annually or every 6 months), the more you save.
Annual or Once-Per-Term Car Insurance Premiums
When you pay annually for car insurance, you’ll normally get an even better rate. Paying upfront and for the entire year will not only get you the best auto insurance savings (often up to 10% off), it’ll also mean you won’t miss any payments throughout the year.
What’s more is that you’re locked into a rate for the entire year and your driving habits are reviewed only once a year. If you have less than desirable driving habits or get a citation, this could help keep your rates low for longer.
Six-Month or Biannual Car Insurance Premiums
With six-month policy premiums, you may still enjoy some prepaid discounts, along with lower bill totals. For some, paying a lump sum annually may not be possible, while paying every six months is much more reasonable.
Quarterly Car Insurance Premiums
While not offered with every provider, quarterly payments may still give you some discounts for fewer payments throughout the term. Additionally, you’ll have a manageable premium bill every three months.
Monthly Car Insurance Premiums
Paying for auto insurance monthly won’t give you any additional savings, but you will have lower monthly bills that you can count on. If you currently can’t afford to pay any other way, monthly car insurance premiums are a great option. If you pay monthly, ask for any discounts associated with automatic electronic funds withdrawal (EFT). Insurance companies like saving the cost of mailing out bills, so setting up monthly debits may make sense.
WHICH CAR INSURANCE PAYMENT PLAN IS RIGHT FOR YOU?
In general, the car insurance payment plan you choose is that one that makes the most sense for you, financially.
While an annual premium payment may save you the most, it may not make sense if it causes undue stress because of the large payment at one time.
Try to pay the most you can (based on your budget) in the fewest payments possible. That way, you’ll get the most savings without undue financial stress.
Choosing the right auto insurance policy for the right price can be challenging. Begin with a great insurance broker who has your best interests in mind and can help give you options that fit both your lifestyle and budget.
If you need help finding the best car insurance coverage for the best price, start by speaking to a SimplyIOA agent at 833.872.4467 or get an auto insurance quote online now.
