Do you pay car insurance monthly, biannually, or annually?

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When it comes to paying car insurance premiums, you have options. Most insurers give customers the choice of paying monthly, biannually or annually. Some may offer quarterly payments as well.

Car insurance can be paid monthly, every six months, or once a year, depending on your budget and how you prefer to manage expenses. Most drivers choose monthly payments because they’re convenient and easier to fit into a regular budget, though they often include small service fees. Paying biannually or annually requires a larger upfront cost but can reduce your total premium and may qualify you for a discount, making it a smart choice for drivers who want to save over time.

Ultimately, the best payment schedule depends on your cash flow, financial goals, and how you like to budget for ongoing expenses. We’ll break down your payment options, the pros and cons of each and how you can make the best decision for your household.

How often do you pay car insurance premiums?

If your insurer lets you choose your payment schedule, you can typically pay monthly, every six months, or once a year. The best option depends on your financial situation and whether you value convenience or long-term savings.

Let’s take a look at how three people made the decision:

• John opts to pay his insurance annually. That means coming up with $2,600 each year for full coverage. While that’s a lot, he saves more than $300 this way, thanks to his insurer’s 12% pay-in-full discount. To ensure he has money to make the annual premium payment, he moves $220 into a savings account each month.
• Mark prefers to pay every six months. His insurer offers a 10% discount for this payment schedule, which brings his $1,200 premium down to $1,080. For Mark, this is the best of both worlds. He still gets a discount, but paying twice a year helps with his budget and cash flow.
• Sarah is a young adult with a six-month policy with a $1,800 premium. The prospect of paying that entire amount at once is daunting. Instead, she pays $315 a month. That includes a $15 convenience fee, but she is happy to pay it in exchange for the flexibility of monthly payments.

“Your payment frequency has a direct impact on both cost and convenience,” says Howard Goldberg, vice president of customer service at insurer Plymouth Rock Assurance. “The right choice comes down to your budget and how much flexibility you desire.”

Essentially, there is no wrong or right way to structure your insurance payments. Consider your budget, cash flow and preferences. Some people don’t mind paying convenience fees for the flexibility of monthly payments while others want to be sure they get every discount possible.

Pros and cons of monthly, biannual, and yearly premiums

There are advantages to each payment schedule, so it’s important to consider what matters most to you. Here’s a breakdown of the pros and cons of paying your car insurance premiums monthly, biannually, or annually.

“Monthly payments spread the cost out but usually carry installment fees, making them more expensive over time,” according to Goldberg. “Semi-annual payments give you flexibility to adjust coverage more frequently and typically involve fewer fees.”

Meanwhile, annual payments generally deliver the best value since insurers often provide discounts for paying a policy in full. Those discounts could save you hundreds of dollars, making it the best option for those with the financial means to make a large lump sum payment.

Not everyone can do that, though. Younger drivers and families with tight budgets may prefer the flexibility of monthly payments. Although monthly payments may mean paying an installment fee, that can be money well spent if it makes budgeting easier.

Is it better to pay car insurance monthly or every 6 months?

You’ll want to choose the payment option that best fits your financial situation. If you have enough savings set aside, paying annually could save you hundreds of dollars a year on car insurance. However, if paying the full amount upfront would strain your budget, a monthly schedule can make your premiums more manageable and easier to plan for.

“It comes down to what your financial situation is,” says Steven Cegelka, chief operating officer of Ignition Dealer Services, which provides financial solutions to vehicle dealers.

Mathematically, an annual payment is almost always the best option. You skip installment fees and may also get a 5% to 15% discount. Some insurers only offer six-month policies so in those cases, a biannual payment would qualify for an upfront “pay in full” discount.

If you can get a 12-month annual policy, that has an added benefit. “You’re usually going to lock in that rate,” Cegelka says. With a six-month policy, your rates could be recalculated and increased midway through the year.

How much you can save by paying in full

Here’s a look at the difference in how much you might pay in total for a policy with an annual $1,200 premium:

• Annual payment with a 10% “pay in full” discount: $1,080
• Monthly payments with a $5 installment fee: $1,260

In this example, there is a $180 difference between paying in full with a discount and paying monthly with installment fees. That’s roughly the equivalent of getting 1.75 months of insurance for free.

If you can afford to pay your insurance in full, that will save you the most money. But if you can’t comfortably afford paying once or twice a year, monthly payments will likely be a better choice. 

Still, annual payments aren’t right for everyone. If making an annual payment would strain your budget and potentially leave you short on cash or late on other bills, paying monthly is the smarter move.

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What should you consider when choosing a car insurance payment plan?

If price is your main consideration, shop for the lowest-priced coverage that meets your needs and then pay annually. If you want flexibility or plan to switch insurers mid-year, monthly payments can make your life easier.

You’ll want to take all the following into account before deciding which payment plan to use:

• Savings and cash flow. Do you have enough savings or income to pay a large lump sum comfortably? Or would smaller monthly payments be more manageable?
• Budgeting preference. Some people like the “one and done” aspect of an annual payment while others would rather not spend so much all at one time.
• Discounts and fees. Check to see if your insurer offers a pay-in-full discount and if it’s worth paying annually or biannually to get it. Also, see if a convenience or installment fee is charged for monthly payments. If not — that may make paying monthly a more appealing option.
• Your future insurance needs. If you plan to switch insurers soon – for instance, you are planning a move or only driving temporarily – paying monthly may make it easier to cancel. Then, you can end your coverage and not have to worry about getting a refund for the unused portion of your policy.

Can I switch from monthly to annual payments mid-policy?

Most insurance companies will allow you to change your payment schedule mid-policy. However, don’t expect to get the same discount you would have if you had made an annual payment at the start of the policy period.

“Normally to achieve the paid-in-full discount, you must pay the full-term premium at renewal,” Goldberg says. 

However, you could still save money. “The benefit of paying early is a reduction in monthly fees you may be paying for each installment.”

Goldberg advises talking to your insurance agent to determine how your company handles changes in payment schedules.  

Understanding your car insurance payment schedule

Car insurance companies provide their customers with the option to pay their premiums on different schedules. The most common options are monthly, biannual and annual.

Annual and biannual payments may qualify you for discounts while monthly payments are convenient but could come with fees. Consider your own financial situation and personal preferences when selecting how to pay your auto insurance premium.

Maryalene LaPonsie

 

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Insurance expert Maryalene LaPonsie has been writing professionally for 25 years, with the past decade focused on personal finance -- insurance, investing and retirement. She is a regular contributor to U.S. News & World Report, Forbes Advisor, USA Today Blueprint and Money Talks News.