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
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Paying for car insurance can be stressful. Insurance companies try to help by offering several different payment methods and payment plans. Plans available from some providers include partial payments, automatic drafts, and full annual payments. Depending on your situation, one approach 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 save on monthly fees. Having your policy paid in full takes one bill off your monthly list. It ensures you won't experience a lapse in coverage. The downside to paying annually is that it can be challenging to have the amount of money needed to make a full annual payment.

Electronic Funds Transfer

Electronic funds transfer (EFT) is when the insurance company requests a payment from your checking account, savings account, or credit card to cover your monthly premium. You can often avoid paying fees and you may 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. The upside to credit cards is that your insurance payments can help you earn reward points on your card. Some companies do not offer payment by credit card as an option for EFT.

Monthly Electronic, Credit, or Cash Payment

Paying monthly is a common preference for many people. Monthly payment options include electronic checks, credit cards, and cash. An electronic check is a one-time withdrawal from your checking or savings account. Both electronic checks and credit cards 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 rated as 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 on a semi-annual policy is also a good option. A semi-annual payment plan refers to a payment every six months. If you have a semi-annual policy, your rates could change every six months. Annual policies can also be paid semi-annually.

Quarterly payment plans have policyholders pay every three months. This option can help you avoid some payment fees. Monthly payments are a good option if you tend to be tight on cash. If you're making manual monthly payments, be careful about paying late or missing payments. Missing payments can lead to a lapse in coverage. Pay on time and, if at all possible, opt for using EFT.

If none of these seem quite right for you, talk to your insurance carrier and see if it has other payment options available that are a better fit.

Required to Pay In Full

If you have a history of letting your car insurance lapse for nonpayment, you might not be given a payment plan option. Insurance carriers are not required to offer a payment plan. Paying in full can be difficult. If you can't come up with the cash to make an annual payment, see if the insurer will accept an electronic funds transfer or look for car insurance somewhere else.

The Bottom Line

Selecting the right payment plan is important when setting up your insurance policy. Changing your selection can typically be done at any time. Most insurance companies also allow you to pay extra at any time, which reduces your future payments. Take your car insurance seriously and prioritize it in your monthly budget.