Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Sep 29, 2021

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Just the Basics

  • It isn’t bad to pay monthly car insurance instead of in full, but you may be paying hidden fees
  • Monthly insurance rates are more affordable, but paying in full is often cheaper in the long run
  • Paying for your car insurance in one lump sum may earn you a paid-in-full discount

Is it bad to pay monthly car insurance instead of in full? Fortunately, paying monthly insurance installments is convenient and more affordable than paying in full for many drivers.

However, your provider could be charging you hidden administrative fees and non-transparent annual percentage rates (APR).

Keep reading to compare the pros and cons of paying monthly or in full for car insurance, and learn how to reduce the cost of car insurance no matter what payment plan you choose.

Even if you choose to pursue affordable monthly car insurance instead of in full, enter your ZIP code into our free rate tool above to compare quotes from the best providers in your region.

Is it bad to pay monthly car insurance instead of in full?

The typical car insurance policy is sold as a six-month term and costs $504 on average. It fits many drivers’ budgets better to pay this amount in monthly installments instead of upfront.

Paying monthly for car insurance is a legitimate way to break up your rates into something more affordable.

Almost all of the major car insurance companies allow customers to pay monthly for insurance.

For example, full and monthly billing plans are included in the State Farm, Allstate, Progressive, and GEICO payment options.

However, you may be paying hidden fees and missing out on some easy discounts. Also, the savings are not substantial enough to differentiate between monthly or in-full payments through some providers.

If paying in full only saves you $30 annually, it might not be worthwhile. But if it saves you $300 annually, then it’s worth paying upfront.

Fortunately, both monthly and in-full payments are good options for customers. But the best choice for you depends on your budget, comfort levels, and personal circumstances.

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What are the pros and cons of paying for car insurance monthly?

There are both positives and negatives to paying for monthly car insurance rates instead of in full. This particular payment plan works for some people, but it isn’t always the best option for everyone.

Who should pay for car insurance monthly? Anyone who cannot afford to pay their entire policy as a lump sum and people who want to invest that money into other significant expenses benefit from monthly payments.

The ​​average car insurance cost per month is around $84. However, there are many different factors that affect the price of car insurance, like your age, driving record, and ZIP code.

Take a look at the benefits of paying your car insurance company monthly instead of in full:

  • Affordability: While it’s not usually cheaper to pay insurance monthly, your total premium is broken into six or 12 installments, meaning you pay a smaller amount each month, which fits some budgets better.
  • Convenience: Many bills are paid monthly, plus most people earn monthly incomes. You can typically set up auto-pay through your provider for monthly installments as well.
  • Flexibility: Paying monthly means you can switch providers midway through your term more easily if you’re unsatisfied. You also see immediate changes to rates if you change your policy.

But what are the cons of paying for car insurance monthly? Unfortunately, your provider may be charging you hidden fees if you make monthly payments.

You could be charged administrative and overhead fees because of the costs associated with paying your bill monthly.

Similarly, companies are not transparent about how your annual percentage rate (APR) is calculated. Also, fractional premium payments associated with monthly car insurance bills are unregulated.

Some financial experts suggest the APR for monthly car insurance payments could be as high as 17%.

If you miss a payment, you risk losing coverage. Not only does that leave you potentially unprotected, but experiencing a coverage lapse for even a few days can cause your rates to increase.

But your provider cannot terminate your coverage without warning you. According to the Insurance Information Institute (III), the company must mail you a letter explaining the reason for termination and a date.

So if you do miss a monthly payment, you typically have 30 days to make it up.

Finally, if you’re caught driving without insurance, you risk fines as well as a potential license suspension. In some states, your car registration is also suspended.

What are the pros and cons of paying for car insurance in full?

There are some positives and some negatives to paying for your insurance in full.

Usually, full payments are the least expensive, as it costs the insurer more money to process monthly payments manually.

Who should pay for car insurance in full? Anyone who can afford to pay for car insurance upfront should do so as long as they don’t plan to make any significant policy changes.

Remember, car insurance costs $504 for a six-month policy on average, so that’s $1,009 annually.

Take a look at the pros for paying in full for insurance:

  • Price: Paying in full avoids hidden administrative fees; usually, this is the cheapest option available to drivers.
  • Discounts: Some companies offer pay-in-full discounts to drivers, reducing rates by an additional 10%.
  • Reliability: You don’t need to worry about missing your policy payments for an entire term.

But there are also cons associated with full payments. For example, some drivers simply cannot afford to pay such a large amount upfront. Also, some financial experts believe that providers treat full payments like loans to the insurer.

However, people who pay premiums in advance are not borrowers but are more like lenders.

Should you pay monthly car insurance instead of in full?

It’s perfectly reasonable to buy monthly car insurance instead of in full. Pick a payment method that balances your personal needs and budget.

Some companies will even offer quarterly and semiannual payment options, allowing for greater payment flexibility.

Just remember to keep an eye on how it impacts your rates and check what discounts your provider offers.

Drivers who pay monthly or in full can potentially benefit from both paperless discounts and automatic payments discounts. However, your provider might offer substantial paid-in-full deals.

Whether you’re looking for monthly car insurance quotes instead of in full or a single lump-sum policy, enter your ZIP code into our free tool below to compare rates from the top companies in your area.