Is it better to pay for your insurance monthly through instalments or pay for it annually? Truthfully, there are pros and cons to both. In this article, we weigh up whether the increased price of monthly payments in the long term is beneficial in making the price of car insurance easier to manage in the short term.
What Is Pay Monthly Car Insurance?
When you take out car insurance, a policy usually lasts for one year. However, it is your choice as to whether you pay for that year in full and upfront, or if you pay in monthly instalments.
How Does Paying For Car Insurance Monthly Work?
Generally speaking, if you decide to pay for your car insurance monthly, your first payment will be larger - somewhere between 10% and 25% of your annual premium. The remaining amount will then usually be divided by 11 to give you payments for the rest of the year to pay via direct debit each month.
The specifics will of course vary between insurers, so to ensure that you know how your payments work, check your policy documents or contact your insurer directly.
Should You Pay Monthly For Your Car Insurance?
This is a tricky question to answer, as this will be unique to each policyholder’s preferences and financial situation.
However, often, paying for your car insurance premium in full on an annual basis is the cheapest option. This is purely because you will not have to pay any interest on the price of your premium. Paying for your car insurance annually means you get your entire payment sorted for the year, and you will not need to worry about it again until your renewal date rolls around.
On the other hand, paying monthly means you can spread the cost of your premium, which is a more affordable solution for some people. However, it is important to bear in mind when you pay monthly that you will be paying interest - so overall, monthly payments will cost more in the long-term. Despite this, paying monthly for your car insurance may be a good option for you, depending on your cash flow.
Ultimately, paying monthly breaks your premium down into more manageable chunks each month, but you are paying for that benefit.
What Happens With Monthly Car Insurance Payments If You Want To Cancel Your Policy?
If you decide that you want to cancel your policy or perhaps switch car insurance providers to get a better deal whilst you are within your existing policy term, you should contact your insurance provider and they will tell you how best to handle this.
How Much Does Pay Monthly Car Insurance Cost?
The cost of your policy will vary depending on a range of factors regarding you, your vehicle, and your insurer. Additionally, interest rates will vary depending on your insurance provider.
How Can You Reduce The Price Of Your Car Insurance Premium?
Besides paying annually for your car insurance, there are other methods to consider to potentially help you to save money on your premium. These may include:
- Taking out telematics insurance - Telematics or "black box" car insurance uses a device to monitor your driving and calculate your premium based on the way you are driving.
- Driving less - As insurance costs are based on risk factors, the less time you spend on the road, the lower your premium may be.
- Increasing your voluntary excess - While compulsory excess cannot be changed, you can increase your voluntary excess, which may reduce the cost of your premium. However, it's important to note that if you make a claim, you will need to pay both parts of your excess - so make sure you set your voluntary excess at an amount you can afford.
- Securing your vehicle - You could reduce the cost of your premium by fitting your car with an approved alarm and immobiliser and keeping it in a well-lit area or a secure place such as a garage.