How often is auto insurance paid?
Most auto insurance companies write policies to be paid on a monthly or annual basis. On average, auto insurance in the U.S. costs around $118/mo.
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Daniel Walker
Licensed Auto Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Auto Insurance Agent
UPDATED: Oct 18, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Oct 18, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Knowing details about your car insurance payments seems like a no-brainer, but it’s essential to manage your car insurance
- Some companies charge separate transaction fees for monthly payment options.
- You may be able to pay the full premium ahead of time to take advantage of special discounts.
- It’s prudent to shop around for better rates at the end of a policy term to maintain the lowest premium levels possible.
When it comes to insurance payments, there are several options available to you.
In the past, insurance had to be pre-paid for a six-month or one-year term, but companies started offering monthly auto insurance rates that are easier on tight budgets.
However, taking advantage of the monthly options can lead to higher fees. Here’s what you should know about the different payment options so that you can make an informed decision.
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Determining the Policy Period
When you’re shopping for insurance, you’ll have to consider the different policy period options. Known as the policy period, this starts on a date of your choosing and can be at any time of the year.
You will have the following choices:
- Month-to-month terms that are usually reserved for high-risk drivers
- Six-month premiums that are preferred by most carriers
- One-year coverage options are available to consumers
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The Hidden Costs Associated with Paying Over Time
Many people choose to pay their insurance monthly or quarterly rather than paying the full amount at one time.
While most companies are happy to provide you with payment options, you should remember that these do come with some hidden costs.
Before you decide to make smaller payments throughout the year, ask your company if there are any fees associated with this option.
The insurance company may charge a little more to cover administrative costs and the assumed risk that a client may stop paying on the policy midterm.
Some companies don’t offer installment plans, but they will provide you with assistance for financing, known as a “premium financing agreement.”
If you decide to sign up for this type of plan, be sure that you understand:
- The schedule of payments
- Finance charges and annual percentage rate
- The potential consequences of a missed payment
These fees can vary widely from one company to the next. When shopping around, be sure to ask if there are any installment fees associated with paying your bill a little at a time.
You May Save by Pre-Paying
Insurance companies often offer exclusive discounts for safe drivers, certain types of vehicles, and even specific professions.
What many people don’t realize is that it’s also possible to save by paying for the policy ahead of time.
If you can afford to pay your entire premium at the beginning of the year, then this can be a smart way to save money.
You don’t even have to worry about losing money if you decide to switch carriers halfway through the year. Most companies will pro-rate the bill and send you a refund check for the remainder of the term.
Loyalty Doesn’t Always Pay
Insurance premiums can vary widely from one company to the next, and you may not be rewarded for sticking with the same company year after year.
Research shows that insurers use special software and algorithms to show how sensitive customers are to price increases.
If they think they can bump rates up slightly without losing customers, they will.
This possible price increase is one reason why you should shop around once a year. Whether you’re on a six-month or one-year policy period, it’s smart to take a look at the competition and see what they have to offer.
You just may find that another company is willing to provide you with more drastic discounts to gain your business.
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No Lapses in Coverage
Another great benefit of prepaying your auto insurance is that you won’t have to worry about a lapse in coverage. If you forget to pay your bill one month, then the premiums may rise.
However, you won’t have to worry about this if you cover the entire expense six months or even one year at a time.
Another added benefit of the annual renewal is that you’ll have that opportunity to shop around before you sign up for another term.
When you’re prepared to cover the full cost in advance, you may be able to negotiate a lower rate with the next company.
Before you sign up for any particular term, learn more about the payment options and hidden fees. If you have this information when you start shopping around, then you can make a more useful comparison.
The goal is to save money in the long run, so it’s important to consider all of the potential hidden costs, including service fees for spreading the cost out over more payments.
Enter your ZIP code in our FREE comparison tool to start your journey on saving money!
Frequently Asked Questions
How often is auto insurance paid?
Most auto insurance companies offer monthly or annual payment options. The average cost of auto insurance in the U.S. is around $118 per month.
Are there any hidden costs associated with paying insurance premiums over time?
Yes, there may be hidden costs when paying insurance premiums monthly or quarterly. Some companies charge fees to cover administrative costs and the risk of clients stopping payments mid-term. Ask about any associated fees before choosing this option.
Can I save money by pre-paying my auto insurance?
Yes, pre-paying the entire premium at the beginning of the policy period can lead to savings. Insurance companies may offer exclusive discounts for upfront payment. If you switch carriers mid-term, most companies will pro-rate the bill and provide a refund for the remaining term.
What are the benefits of prepaying auto insurance?
Prepaying eliminates the risk of lapses in coverage and potential premium increases due to missed payments. It also allows you to shop around for better rates before committing to another term.
What should I consider when choosing a payment option for auto insurance?
Before signing up for a particular payment term, it’s crucial to understand the available options and any associated fees. Knowing this information upfront will help you make an informed decision and compare costs effectively.
Should I stick with the same insurance company to receive loyalty discounts?
Insurance premiums can vary among companies, and loyalty doesn’t always guarantee lower rates. Shopping around annually and comparing offers can help you find better discounts from other insurance providers. Use our free online comparison tool to obtain quotes from multiple top-rated insurance companies. Just enter your ZIP code to get started.
Free Auto Insurance Comparison
Enter your ZIP code below to view companies that have cheap auto insurance rates.
Secured with SHA-256 Encryption
Daniel Walker
Licensed Auto Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Auto Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.