Should You Pay Your Auto Insurance Monthly Or Annually?

Most car insurance companies allow you to pay for coverage through monthly premiums instead of forcing you to a large upfront fee to perform. To determine which option is better, you should carefully consider the benefits against the potential disadvantages in the light of your personal circumstances. Depending on your financial situation, need for scheduling flexibility, and other factors, making the wrong choice can have long term consequences.

This article provides a roadmap for navigating your car insurance payment schedule. We give you a glimpse into the advantages and disadvantages of the monthly payments over a year.

Pro: Easy on your monthly budget

If you're like most people, you manage your finances with a monthly budget. Your income is offset by your accounts, funds remain allocated toward entertainment, and other investment outflows. Under this budgeting system, causing a large upfront payment for the year coverage may prove unmanageable. This is especially true in the current economic climate.

Your monthly payments will fit nicely into your budget. The payments represent an expected outflow already assigned in your financial plan.

Con: It's Inconvenient

Paying your car insurance premiums for a monthly schedule increases the paperwork you are forced to manage. Not only will you need to open your statements and file them for future reference, but you also need a monthly check to write.

On the other hand, many car insurance companies help set up an automatic payment plan. The funds are drawn directly from your bank account on a predetermined schedule. This reduces paperwork and eliminates the need to remember to write a check each month.

Pro: Provides liquidity

If resources are limited, there is value in having the ability to keep your money for as long as possible. Monthly payments car insurance cash value. For example, a portion of your monthly budget is allocated toward making a small investment in mutual funds. If you are forced to advance several hundred dollars for an annual auto insurance payments, you lose the liquidity needed to make your monthly investments.

Con: Including Processing Fees

Most car insurance companies require a small monthly fee for processing your payments each month. These processing fees are usually small, it is not uncommon for them to be as low as a few dollars a month.

Over one year, the fee up to $ 50 or more, depending on your policy. While some financial planners suggest that paying this fee is an unwise way to spend money, it depends largely on your personal circumstances. If money were unlimited, the experts are correct. This small fee is worth it given the liquidity scheme offers.

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