Is it bad to pay all at once on car insurance?
It is not bad to pay all at once on car insurance, as you’ll probably save on your rates when you do. There are fewer administrative fees and lower interest rates when you pay for coverage in a single lump sum. You may also qualify for discounts of up to 20% for full payment, depending on your insurer. However, if you can’t afford to pay a lump sum or you’re expecting a mid-policy term change, it may be bad to pay all at once on car insurance.
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UPDATED: Sep 29, 2021
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- Paying your car insurance all at once isn’t a bad idea and can save you money
- Paying all at once on car insurance is lower risk than monthly payments, so your rates may be lower
- Several insurance companies offer discounts for full payment; you could save up to 20%
What does paid in full mean for car insurance? Essentially, it means you pay the full cost of your insurance policy (whether it’s six or 12 months) at one time, rather than paying monthly for car insurance.
So is it bad to pay all at once on car insurance? The short answer is no, and you may even qualify for a discount for paying car insurance in full.
Read this article for information about paying for your car insurance all at once rather than in monthly installments, whether car and safety laws apply, and more.
Whether you plan to pay for your car insurance coverage monthly or all at once, it’s always a good idea to compare rates and make sure you’re getting a good deal. Enter your ZIP code in our tool to get a free quote and get started today.
Should you pay for your car insurance all at once?
Most insurance companies offer the option to pay for your car insurance in a single payment or as a monthly fee. Either option is acceptable, but if you can afford it, paying for your car insurance all at once is a good idea.
Why? Because it saves you money. You’ll typically find that the cost of your insurance is lower when you pay for your insurance in a single lump sum than if you pay monthly.
Ultimately, full payment is a lower risk for insurance companies, so you’re charged less (more on this later).
In addition, many car insurance companies offer discounts to insureds who pay for their car insurance all at once. If you’re wondering how to reduce the cost of your car insurance, a full payment discount is a great option.
Take a look at this table for a list of companies that offer a full payment discount and how much you could save.
|Insurnace Company||Offers a Full Payment Discount||Amount Saved with a Full Payment Discount|
|American Family||Yes||Not Available|
|Country Financial||Yes||Not Available|
Other payment discounts to talk to your insurer about include electronic payment and auto-pay.
Why does insurance cost more if you pay monthly?
We already talked about full payment discounts, and as we noted in the previous section, total payment upfront is a lower risk to insurers.
Why? When you pay monthly, you could choose to stop paying for coverage before your policy expires, and with that additional risk comes a higher cost to you.
Paying in full, by contrast, means there’s no risk to the insurance company that they won’t receive your payments. Some consider this a way of “loaning” the total amount of your coverage to the insurance company before you need it.
Additionally, there are fewer administrative fees when you make fewer payments, which can mean lower rates.
Finally, when you pay monthly, there is an extra annual percentage rate (APR) cost. In short, the interest you pay on monthly insurance is higher than what you’d pay when you give the insurance company a lump sum for the whole coverage period.
Despite the additional cost associated with monthly payments, it may still make more sense for you to pay that way, depending on your circumstances. Keep reading for reasons why paying for your car insurance in full may not be a good idea for you.
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What are the downsides of paying for your car insurance all at once?
While you can save up to 20% on your rates by paying for your car insurance up front, the size of a single payment that covers between six and 12 months of car insurance coverage may be cost-prohibitive.
If a lump sum is not affordable, it isn’t a good idea to try and make the payment anyway.
Additionally, if you anticipate mid-policy term changes to your coverage, monthly payments may be a better idea than paying for your insurance up front.
For example, if you know one of the drivers on your policy will drop off before your current coverage expires, it may be easier to have a monthly payment that can be adjusted as necessary.
Paying Your Car Insurance All at Once: The Bottom Line
Paying your car insurance all at once isn’t a bad idea because it can save you money in the long run. Companies like Allstate, Farmers, and GEICO all offer discounts for full payment. You can save up to 20% on your rates by paying for your car insurance all at once.
The best way to make sure you’re getting a reasonable rate, regardless of whether you pay your car insurance in monthly installments or all at once, is to shop around. Use your ZIP code in the tool on this page to get a free quote and compare right now.