Benefits and Drawbacks Of Paying Annual Auto Insurance Premiums

Any time a driver takes out an auto insurance policy, they will have to think about various payment options for their auto insurance premiums. Most times, the purchaser can choose to pay monthly, quarterly, biannually or in annual payments. Each driver chooses his or her own option; what makes sense to one may not be the right option for another. Here are some of the drawbacks and advantages of choosing the annual payment option for auto insurance premiums.

Pros

• Once and done - the annual premium payment option gets your auto insurance costs off of your plate all at once. If you have the cash on hand, prepaying can be a great way to handle this routine cost of operating a vehicle.
  
  
• Discount savings - one very important thing to remember is that many insurers offer discounts for annual premium payment options. Or, to put it another way, those opting for the monthly premium payment may be getting charged additional fees or a slightly higher rate, and that money can add up over time. This is one of the most important reasons that drivers decide to pay all of their insurance upfront.
  
  
• Less paperwork - another reason that some consumers like the annual payment option is that it cuts down on all those monthly bills. Making the bulk payment for auto insurance gives you one less envelope to deal with in that mix that includes rent or mortgage payments, phone, TV and Internet bills, electric, water and trash bills, and all the rest that might come in the mail on a monthly basis.

Cons

• A checking account shock - some drivers decline the annual payment option, fearing that the size of that single payment could overwhelm their checking account. For consumers to keep a relatively low balance in their household accounts, a monthly payment option may be a better fit.
  
  
• Less visibility - when a driver makes annual payments, it may be harder to see how any change to a policy will immediately a fact the amount that he or she is paying. Drivers might change the number of vehicles covered, the number of drivers on a policy or any extra features during a specific month. With monthly premium payments, it's nice to be able to see how those changes are taking effect.
  
  
• Instinctive angst - an annual auto insurance premium payment will generally exceed several hundred dollars. Paying all of this in one amount can cause a natural feeling of despair in consumers who may be less able to afford their auto insurance coverage. Married drivers or others sharing a policy may have trouble teaming up and scraping together all of that cash at once. This is another reason to go with monthly premium payments that take a reasonable amount out of each paycheck or household monthly income.

Keep all of these important aspects in mind when choosing for any of the above auto insurance premium payment possibilities.