When you shop for car insurance, you ideally want adequate coverage at an affordable price. However, you should also compare the frequency of payments and not just the premium, as it may make an impact on the total cost of your insurance.
Your quote for a car insurance policy may suggest an annual premium. Still, most insurers also accept a monthly car insurance payment, but it can end up being more expensive.
So, while you can make monthly car insurance payments with most insurance companies, this choice may impact the overall cost.
Insurance companies will usually offer monthly, biannual or annual payments for your car insurance policy.
Generally speaking, paying your insurance premium annually in one lump sum is typically a cheaper option than splitting this into monthly payments. However, this ultimately depends on the insurance company and its specific policies.
Making monthly car insurance payments may simply be easier for your budget as you can spread the cost out into more manageable payments. You may still opt for a monthly payment on your car insurance - it just may cost you a little more over the year for the privilege.
Annual payments may typically be cheaper as insurance companies tend to provide discounts for paying upfront. The insurance company knows you’re locked in as a customer for at least twelve months, and it saves them time and effort in ongoing costs compared to chasing you for monthly payments.
If you prefer to pay monthly car insurance premiums, consider comparing the exact monthly cost of your policy. You can look up a car insurance cost per month calculator or ask different insurance providers their monthly premium costs.
However, suppose you have the funds to make a larger one-off payment. You may then consider the annual car insurance payment instead and spare yourself the headache of budgeting for and scheduling payments every month.
If you’re not sure how much or how often you’ll drive your car, you might consider purchasing a short-term car insurance policy. These include a monthly car insurance policy or a ‘pay as you drive’ policy. If you buy this latter policy, you can pay only for the distance you drive, which may be preferable if you don’t want to pay a full year’s premium.
A monthly car insurance policy, for instance, involves the option of renewing the policy at the end of the month if you know you’ll be consistently driving over the next 30 days. Buying a monthly policy usually also gives you the option of cancelling the policy when you don’t require it anymore, without paying any extra fees or charges.
When buying a monthly car insurance policy, you’ll need to confirm the policy duration with the insurer. You don’t want to end up purchasing a policy that offers you monthly car insurance rates but locks you into the policy for a year. You can also look for the specific terms in your car insurance policy document or the insurer’s Product Disclosure Statement (PDS).
Whether you opt for a monthly car insurance policy or just make monthly payments on an annual policy, you may be able to cancel it at any time. Depending on the insurer, however, this may require paying additional fees and administrative costs.
Some insurers may charge you a significant early cancellation fee for choosing to terminate your annual car insurance policy before the year is up. You may consider discussing your options with the insurer before purchasing the policy to help you make an informed choice.
This article was reviewed by Peter Terlato before it was published as part of RateCity's Fact Check process.
