Annual vs. Semi-Annual Car Insurance Payments

Insurance companies offer an annual or semi-annual policy and various payment plans to pay car insurance to fit your budget. There are also different ways to pay your car insurance payments to make the process seamless.

Annual vs. Semi-Annual Car Insurance

When you purchase car insurance, your policy term will be either six or twelve months. Some carriers offer both terms, while others only offer one or the other. This is specific to the carrier from which you buy your insurance. If you can purchase a twelve-month policy, you will lock in your rate for a full year, whereas a six-month policy will allow your insurance company to re-underwrite your policy more often. However, most auto insurance companies offer substantial discounts if you pay your premium in full. If you can afford to pay your annual policy in full, you will qualify for the paid-in-full discount, but if you can only afford to pay in full for six months upfront, opt for a six-month policy term instead.

Another thing to consider is how often you want to shop around for car insurance. It's always a good idea to make sure you're getting the best rate. A six-month policy will give you more opportunities to shop for a cheaper one at your renewal.

Payment Options for Car Insurance

Many insurance companies have various payment plans and payment options for their customers.

 • Pay in Full: By paying your policy in full when you purchase it, you will most likely gain a large discount and not have to worry about the hassle of making monthly payments for your coverage.

 • Monthly: You can pay your insurance monthly, but your insurance company may not offer six or twelve equal installments to set up your policy on a payment plan. You are typically required to pay a larger down payment, and the balance of the policy will be spread out over the remaining installments.

 • Electronic Funds Transfer (EFT): You can opt to have your full premium or your monthly car insurance payments automatically debited from your bank account.

 • Recurring Credit Card: You can opt to have your full premium or your monthly premiums automatically charged to your credit or debit card.

 • Bill by Mail: If you aren't tech-savvy or prefer not to have your insurance company automatically debit your premiums from your checking account or charge your credit card, you can opt to receive a paper bill and pay your premium manually online or through the mail using a check or money order.

Factors to Consider When Choosing a Payment Method

Consider your full financial picture when making your decision. Check with your insurer for fees and coverage. Some insurance companies might charge an installment fee each time you pay, which can add up. Deciding whether to pay in installments or as a lump sum depends on how you like to pay your bills. Whichever option you choose, make sure to make your insurance payment on time to avoid a lapse in coverage and possible late payment fees.

Putting your car insurance policy on an automatic payment plan, such as an electronic funds transfer or recurring credit card plan, can sometimes earn you an extra discount on your car insurance premium. If you can afford to pay the whole premium upfront and opt for automatic payments, you can compound your savings by earning an automatic pay plan discount and a pay-in-full discount.