Best Ways to Make Your Car Insurance Payment

Payment Methods and Payment Plans

Woman on phone with her car insurance provider with a fender bender in the background
••• monkeybusinessimages / Getty Images

Paying for car insurance can be stressful for many people. Insurance companies try to help by offering several different payment methods and payment plans. Plans available for some providers include partial payments, automatic drafts, and full annual payments. Depending on your situation, one method may work better for you than another.

Paid in Full Annually

Paying in full can be the best option for a couple of reasons. Many insurance companies offer paid-in-full discounts, plus you can also save on monthly fees. Having your policy paid in full takes one bill off of your monthly list. It ensures you will not encounter a lapse in coverage. However, on the downside having a large amount of money necessary to make a full, annual payment may be complicated for some drivers.

Electronic Funds Transfer – EFT

EFT is when the insurance company directly taps into your checking account, savings account, or credit card to withdraw your monthly payment. Often you avoid paying fees and possibly even get a discount for signing up for this payment method.

Using your checking or savings account is a good option because you can set it and forget it, while with a credit card you will have to update your expiration date. Credit cards are nice because then your insurance payments can help you build up reward points on your card. Some companies do not offer payment by credit card as an option for EFT. An electronic funds transfer is the closest option of paying in full.

Monthly Electronic, Credit, or Cash Payment

Paying monthly is a common preference for many people. Monthly payment options include electronic check, credit card, or cash. An electronic check can be used as a one-time withdrawal from your checking or savings account. Both electronic check and credit can be used to pay online, with your agent, or by calling your insurance carrier's customer service number. Cash can be used to pay at most agencies. Just don't use your agency as a bank—it annoys insurance agents when they constantly have to break large bills.

Types of Car Insurance Payment Plans

Annual or 12-month plans have slowly become a thing of the past. However, some insurance companies still offer annual insurance policies. If you are a preferred driver risk, an annual policy is often the best policy. Being locked into an annual policy means your rates will not change for an entire year for any reason other than a change in vehicles. Paying in full means you will not have to think about your insurance payments for an entire year.

Paying in full on a semi-annual policy is also a good option. A semi-annual payment plan refers to a payment every six months. Annual policies can be paid semi-annually, however, if you have a semi-annual policy your rates are up for change every six months. Quarterly plans have policyholders pay every three months. This option can help you avoid some payment fees, which makes it a worthwhile option. Monthly payments are a nice option if you are tight on cash. Paying late is the biggest factor that can make this option a bad one. Pay on time and, if at all possible, opt for using EFT.

A final type of plan is the two months down with a 5-pay plan. This plan is a common option when purchasing a new car insurance policy. Essentially, you get one month without payment being due because you paid that month at startup. Sometimes the month without a payment comes immediately after the policy is started. However, most of the time, the month without a payment comes at the end of the policy term.

Required to Pay In Full

If you have a history of letting your car insurance lapse for non-payment, you might not be given a payment plan option. No, insurance carriers are not required to offer a payment plan in case you were wondering. Paying in full can definitely be difficult. If you cannot come up with the cash, see if you can get signed up for electronic funds transfer or look for car insurance somewhere else.

The Final Word

Selecting both the right payment method and a payment plan is important when setting up your insurance policy. Changing your selection can be done at any time. Most insurance companies allow you to pay extra at any time, usually slowing or reducing your payments. Take your car insurance seriously and prioritize it properly in your monthly budget.