When purchasing property and casualty insurance, like auto, home, boat or renters, you will often be given the option to pay for your premium in a variety of ways. For example, with many insurance companies you can put down a deposit and pay in installments, pay in monthly installments or pay in full. While a monthly option may be easier on your budget, there are benefits to paying your insurance premium in full. To lower your yearly costs, maintain consistent insurance, and get rid of the headache of extra bills, you may want to consider paying your insurance upfront once or twice a year.
So, what are the benefits of paying for insurance in full for a 6- or 12-month term?
The Benefits of Paying for Your Insurance In Full
1. The bills won’t pile up.
Once your insurance is paid in full, you don’t have to worry about getting another bill for 6 or 12 months, depending on the length of your policy. You won’t risk not paying on time, which can potentially void your coverage, lead to higher premium costs, and even damage your credit score or end up in the hands of a collections agency.
2. You don’t risk a cancellation.
Since there’s no risk of missing a payment, you also don’t risk your insurance company cancelling your policy. You’re essentially “guaranteed” insurance for the 6 or 12-month period.
(Your insurance company can still cancel if you neglect to disclose a liability, like a dog or pool, or they suspect fraud.)
3. You’ll pay less over the year.
Some insurers offer a “paid-in-full” discount, so they’ll actually reward you for paying upfront.
Even if the insurer doesn’t explicitly offer this discount, you’ll save a lot in your total costs by paying upfront. Most insurance companies will charge a monthly transaction fee or interest fee each month. This can end up saving you up to 20% in your total premium costs!
Note: This is also a major plus if you have a poor credit profile. In many states, insurance companies will usually take your credit score into account to help them determine their risk when it comes to you paying your monthly premiums. If you pay upfront, the company won’t be as concerned with your ability to pay monthly.
4. Your premiums won’t rise for that period.
If you pay upfront, your insurance company won’t be able to raise your monthly costs—even if you make a claim. You’ll essentially get a “locked” rate for the 6 or 12-month period, since you already paid for each month’s coverage.
This is especially useful for auto insurance with regards to young or inexperienced drivers or those with a lot of accident and traffic violations. If you make a lot of insurance claims, paying upfront can help avoid raising premium costs after each claim.
(Your insurance company will still take note of the claims, though, and they may raise your rates the next contract period.)
What are the disadvantages of paying upfront?
The disadvantage of paying upfront is that it’s harder to switch insurers if you move states or want to compare quotes. It is possible to cancel your insurance if you’ve paid in-full, but it might take awhile to get your money back.
We also know that paying all of your insurance costs upfront can be expensive. It may not always seem financially feasible. But InsuraMatch agents are here to help.
Is in-full payment too expensive?
Even though you can save money over the year by paying upfront, it can still be a decent financial burden to pay all at once. If you pay for your home, auto, and other insurance upfront, you could end up with a few thousand dollars to pay for your policies.
But there are ways to minimize this upfront cost to save even more money on your annual cost. Start by simply asking your insurance agent to see which discounts apply to you and your policy. Learn about some of the possible insurance discounts with the following resources:
- 16 Ways To Lower Your Auto Insurance Premium
- 11 Safety Features That Can Lower Your Homeowners Insurance Premiums
- Find Insurance Discounts You Quality For
Compare quotes and see if we can help you save on your insurance!
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