Why You Might Want To Switch From Monthly To Annual Car Insurance Payments

understanding auto insurance

For new drivers that are looking at insurance options that might allow them to save money, things can be very complicated. While not everyone needs travel insurance, life insurance, or home owners insurance ... almost every state requires that you have auto insurance to drive on public roads. As such, looking for ways to save money on auto insurance is a common question that dads get asked for advice on. While this conversation usually involves shopping for different quotes or eliminating unnecessary policy features - there's another way too.

Most people don't consider the option of paying their insurance other than on a monthly basis. However, you can negotiate with most insurance companies to make quarterly or annual payments for a discount! Some people refer to this as being "fully paid up" or simply paid in full. 

Another benefit is security. Unlike your other bills that are often post-paid - your phone bill or cable bill for instance, car insurance is always pre-paid. If you missed your payment and have an accident then you'll find yourself in trouble since it is highly unlikely that the insurance company will do anything to help you since you failed to make a payment.

Auto insurance comes in many types and sizes. There’s no such thing as a universal insurance policy. In fact, insurance companies  customize each client's policy based on a myriad of factors from personal history to projected experiences based on people of a similar age, location, and type of car. Furthermore, the policies also differ by what's included. Comprehensive coverage, liability coverage, deductible, roadside assistance, rental insurance, collision coverage, bodily injuries and property damage cover, etc., are all part of vehicle insurance. 

The premium amount varies based on the policy and add-ons you choose. It also is dependent on several factors like your driving history, the number of speeding tickets on your record, age, occupation, and sometimes even the credit score. These factors determine how much premium you should pay.  

The insurer also offers different payment options. Apart from monthly, quarterly, semi-annually, and annual premium payments, you can also pay the entire amount upfront. That means you pay all the premiums at once when activating the car insurance policy. Such policy is known as a fully paid-up policy. 

Fully Paid Up Auto Insurance 

A fully paid insurance is where you pay the entire annual premium in a lump sum amount when taking the policy. Some fully paid up auto insurance policies may also offer longer terms but usually this concept is based on annual payments. This insurance is mostly seen online, though you can ask any insurance agent about it. The tenure can vary. The insurer will provide information about how long the policy will be valid. You may also have the option of canceling the policy midway through. 

However, remember that it may not make financial sense to do so. For instance, while you can get money back for unused months that you already paid for, insurance companies will not refund the entire amount when cancel a paid-up policy before its coverage ends. Only choose fully paid-up auto insurance if you are sure of continuing with it as per the contract. 

Paid-up auto insurance is becoming popular because: 

  • You don’t have to keep monitoring the payments every month
  • No need to find different insurance companies to change policies 
  • No increase in the premium amount for the length of the term
  • No renewal charges or additional fees during your contract
  • The equivalent monthly premium amount will be less 
  • Credit scores aren’t an issue
  • A couple of speeding tickets won’t affect the premium amount during the term
  • The insurance company will have to pay back the remaining amount if they cancel the policy from their side 

Be aware though, any policy that is fully paid will not be considered valid if you move, buy a new car, or change driving patterns. For instance, if you buy a policy based on a small monthly driving distance because you work from home and then get a new job with a long commute - this may require updates to your policy to remain valid. The same is true if you decide to take a side hustle such as doing UberEats or DoorDash.

Tips to Save Money on Auto Insurance in Other Ways  

Fully paid auto insurance is not for everyone, though. People relocating frequently and buying new cars often will not benefit from this insurance. In fact, it will lead to losses. You should also consider the tax issues if you plan to cancel the policy and get back the amount. 

In such instances, ask for the following discounts to get a low-cost auto insurance policy: 

  • Anti-theft device discount 
  • Anti-lock brakes discount 
  • Claim-free discount 
  • Defensive driver discount 
  • Occupational discount (applicable for veterans, teachers, etc.) 
  • Green vehicle discount 
  • Good student discount 
  • Insurance bundle
  • Senior driver discount
  • Safe driver discount 
  • Early signing/ early bird discount 

There Are Many Ways To Save Money On Auto Insurance

Many people just simply pick the policy that their dad has but if you are looking to save money there are some great options for shopping around online. For instance, if you are looking for the  cheapest car insurance companies in Wisconsin that no longer means hours of work calling many different agencies. Instead, now you can browse online or work with an agent that handles multiple accounts that offer several discounts to reduce the price of your policy and make it budget-friendly. Take your time to go through the quotes from more than one insurer and compare the offerings to choose the best option. Fully paid auto insurance can be a great way to save money in the long term and not worry about renewing the policy every year. 

Thank you

Like our content? Share it with your friends!