Monthly Car Insurance

In the world of auto insurance, typically polices come in terms of six to twelve months, but some people prefer to pay monthly car insurance, rather than just paying the full amount up front. While there may be a few advantages to doing this, there are a lot more disadvantages that most consumers do not know about.

The main reason that people tend to pay monthly car insurance, rather than just paying up front is that they do not have the large lump-sum of cash on hand to pay for the policy. By setting up monthly installments they are just financing their insurance policy. For most people, who are short on cash to begin with, the idea of paying all at once when they do not have to is crazy.

But, they may not realize that they will likely end up paying interest on the balance every month. This means that the total amount to be repaid will end up being a lot more than it would have if they would have just paid it up front. So, they are able to hold onto their cash, if they have it, for the time being, but it is costing them in the long-run. This is not the only disadvantage however, there are actually many more.

If you decide to pay your auto insurance on a month basis, rather than up front in cash, you may also lose out on many discounts that you would enjoy otherwise. This is because car insurance companies prefer for you to pay for your policy up front. As an incentive, they offer discounts to anyone who pays up front. Some of the discounts you will be missing out on are:

If you pay for three months, six months, or one year up front you will likely get a sizable discount on the months you do pay for. Many times if you pay for three most for example, you would end up paying less than the price of two months due to the discount. So, when you are buying buy the month you are not getting a cheap monthly car insurance policy, rather you are paying more than you would if you payed every six months.

Some of the benefits of car insurance monthly payments are that you will be able to hold onto your cash for various reasons. In today's economy you may want to hold onto your cash for an emergency fund in case your company downsizes for instance

If you pay by the month than you will also be able to reserve the right to cancel your policy at any time, and move to another insurance company, if you are expecting another company to offer you a better rate for instance, you might want to pay by the month.

Last, if you pay by the month you will be able to make changes to your insurance policy by the month, without having to pay for the total amount up front. One instance where this may come in use is if you wanted to drop collision for a month or two to save money.

This is obviously a compare and contrast article which looked at the advantages and disadvantages of paying up front and paying by the month.

Since everyone has different reasons for wanting to arrange their car insurance payments the way that they do. Some people like myself like to pay for their auto insurance up front in order to get the discounts, and to avoid interest payments.

Other people choose to pay their auto insurance by the month. This enables them to keep their money in the back, and finance their auto insurance policy. There are at least two obvious advantages to this. First, if you do not have the extra cash paying by the month will allow you to afford auto insurance. Many people would not be able to make the payment, and have auto insurance, if they had to pay the entire $600 or $700 upfront—because they do not have it.

Even if you do have a small nest egg, in today's economy it may be a good idea to hold on to it. Just think, what if your company laid you off? Would you rather have your nest egg, or would you rather be paid up for six months on your auto insurance?