Monthly Auto Insurance – Is That an Option?

If you are currently in a financial struggle and have difficulty paying the full amount of your premiums up-front, perhaps you are wondering if you are able to choose a monthly payment plan instead. While this is a possibility, the downside is that it does require more research and effort to find such a policy and you are more likely to pay a higher rate for the convenience of flexible options.

Because car insurance is required for almost every driver, most insurance companies must do anything they can to make sure that car insurance is available to whoever needs it. This includes offering flexible payment options that are within the budgets of their customers. However, just like with any product, some companies excel more in terms of providing affordable monthly car insurance plans than others.

Why Don’t Companies Charge Equally?

Because car insurance companies are not required to offer a particular monthly plan at a certain cost, companies consider a number of factors when they offer these options to their customers. The main reason is why the driver requires a monthly payment instead of a traditional premium plan.

Statistics show that drivers who have a lower credit score are more likely to have accidents or traffic violations. Therefore, most people assume that those who are of lower class are the ones who are in need of a monthly payment plan, and thus pose a larger risk to the insurance company. On the other hand, drivers who pay the full amount of their premiums up-front are thought of as being higher on the economic scale and less of a risk, allowing them to get the best rates offered.

A car insurance company must consider what happens when they accept a monthly payment plan. Monthly payments means the company has less money to invest in the form of protection against a potential claim by the driver. Because the car insurance company is at a higher risk of losing money, that higher risk takes the form of higher payments for the customer.

An increase of payments also means that the insurance company must acquire more staff for their accounts receivable department, as well as more collection services to process and administer the more frequent monthly payments. The cost of labor and wages is transferred to the consumer.

Are There Insurance Companies Who Specialize in Monthly Plans?

Most car insurance companies in major cities specialize in or offer monthly plans. These companies are generally smaller agencies instead of underwriters who make their profit by selling policies for larger insurance companies.

Smaller insurance companies typically specialize in drivers who are at a higher risk for accidents, which makes obtaining a monthly plan almost inevitable. However, rates for these payment plans can be much higher than a traditional policy.
On the other hand, these companies do not require a large down payment except in rare situations. If you can scrape $100 together, you should be able to insure your car.

Larger companies such as State Farm, Progressive and The General offer monthly plans to their customers, with rates varying depending on the driver and the vehicle:

State Farm offers a payment plan that divides your insurance premium into monthly payments on one bill. For “recurring monthly” plans, State Farm automatically withdraws your monthly premium from a registered bank account, eliminating the need for postage and check writing, as well as avoiding the risk of mail delay.

Progressive has six-month policies which allow customers to either pay the entire premium in advance, or split the payment in semi-equal payments across six months. Depending on the state you are in, Progressive may make the driver prepay a couple cents more on the first installment, with four equal installments followed by the last installment, which is usually a few cents less. They may also require you to sign up for automatic withdrawals if you would like the monthly payment option.

While The General offers six- and 12-month plans, customers do receive a discount if they pay the premium in full. The company prides itself on its flexibility regarding their payment plan offers, and allows the customer to choose a monthly payment plan after a down payment is made.

What Monthly Payment Plans are Best?

Much like any product, depending on the type and the level of service, there will always be companies that some deem better than others. It is up to the customer to know what he is looking for in a policy and determine what would make a beneficial payment plan for his circumstances and budget. It is best to think of monthly car insurance payments as a temporary solution because the sooner you solve your financial issues, the sooner you can receive lower premiums and discounts once you are able to pay your premium in full and up-front.

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