Is there a best way to pay for car insurance? Nobody’s ever excited to pay the premium on their car insurance, but it’s a part of keeping yourself protected with coverage while driving your vehicle.
First and foremost, the best time to pay your car insurance premium is on time. Late payments can result in lapses in coverage, which not only means you could be driving without coverage, but can lead to legal ramifications and higher premiums when you do get covered again. Always keep your payments up-to-date on auto insurance to avoid consequences like these, which can be serious. After all, driving without proper insurance coverage is a crime.
Fortunately, figuring out the best way to pay your car insurance doesn’t have to be complicated. You have several options, including when you pay, how you pay, and how often you pay. In this article we’ll cover everything you need to know about the best ways to pay car insurance, including:
- Payment methods
- Paying monthly vs. paying in full
- Paying with a credit card
- …and more!
First, let’s begin with payment methods.
Payment Methods
When it comes to paying your car insurance premiums, you have more options now than ever. It’s all about what’s the most convenient for you, as most car insurance companies will take a range of payment options as long as the premiums are paid. Here are some of the most popular options and the pros/cons of each as the best ways to pay your car insurance.
EFT
EFT, or electronic funds transfer, is often considered the best and most convenient way to pay your car insurance premiums. EFT is when an individual or organization takes payment directly from your checking or savings account. EFT payments are fast and easy, and can be set up for autopay each month. Many insurance companies will also waive certain small fees when you sign up for payments via electronic funds transfer, making this one of the best ways to pay your insurance premium.
Debit Card
Most car insurance companies will allow you to pay via debit card information, which you’ll input into their secure website either for autopay or a single payment. We recommend autopay when possible, as it takes away the stress of having to remember your payment each month, and helps you avoid the dangers of lapses in coverage due to simple mistakes.
Credit Card
You can also make payments of your premium with a credit card for most car insurance companies. One benefit of this is that you might be able to accrue points on your credit card, as most credit card companies offer points and rewards for purchases made on the card. Just be sure to pay off your credit card balance each month to avoid the buildup of interest and fees.
Cash
Most insurance agencies will accept cash if you’re particularly old school or use a cash-based budgeting system for your personal budget. You’ll either have to mail cash payments in or hand-deliver them to an agency location near you.
Just remember if mailing cash that you’ll need to send your payment in advance of its due date to avoid late fees or lapses in coverage. Always make sure you know how long it will take for your payment to arrive and ensure that it will arrive before the due date.
Check
You can also pay via paper check, using many of the same recommendations mentioned in the above section on cash. Be sure to make your checks secure, and send them well in advance of your payment due date or hand-deliver them to a local agency location in person.
Installment Plans vs. Paying in Full
Car insurance costs are often referred to as ‘monthly premiums,’ but that’s not entirely accurate. When you sign up for insurance, you’re actually signing up for a longer period of coverage and a total fee for that coverage. 12-month coverage plans used to be fairly common, and now they’re extremely rare. The most common insurance coverage contract is six months, during which your rates can’t be raised until the period is up.
There are, however, options when it comes to when you pay for your coverage. If you’d like, and you have the cash available, you can pay for your entire policy term up-front. Not only is this convenient, but you can sometimes save by paying up front rather than month to month.
If you don’t want to pay up front, nearly every car insurance company and policy will allow you to pay over time, usually month by month. Your total policy cost will be split evenly into six monthly payments, which you’ll then be responsible for paying each month on the due date. Make sure you do pay in time, as missed payments can lead to lapses in coverage or cancellation of your policy.
Your best bet when opting for monthly payments is to set up automatic payments, so that there’s no chance of forgetting or experiencing a lapse in coverage due to a missed payment.
Paying with a Credit Card
Before we conclude, we want to talk about paying your car insurance premiums with a credit card. Most insurance companies will accept credit card payments for car insurance premiums, whether paid up-front or month by month. That said, is paying with a credit card a good idea? Here are some of the pros and cons.
Benefits of Paying Car Insurance with a Credit Card
Paying for your car insurance premiums with a credit card definitely has some advantages. One of the main reasons people use this approach is that their credit card has a rewards system that allows them to earn points, rewards, and even cash back on purchases. Some people actively use their credit cards for as many purchases as possible each month, then pay off the full balance before the next cycle to avoid accruing any interest. If you can be responsible about keeping up with paying the entire balance each month, this can be a great way to be financially savvy and use your insurance premium payments to your advantage.
Another benefit of paying with a credit card is that, if you’re in a financial bind but need to pay your premium to avoid a lapse in coverage, your credit card can give you a little extra breathing room. Let’s say your insurance premium is due on the 1st of the month and your credit card billing cycle starts on the 15th of each month. If you’re tight on cash, you can use your credit card to make the payment on the 1st, then pay off the balance by the 15th to avoid accruing interest.
Credit card payments are also convenient, especially if you already make a lot of your monthly payments using your credit card. You can also easily set up automatic payments on a credit card, ensuring that you’re never late on a payment again and you never risk a lapse in coverage or late fees.
Downsides of Paying Car Insurance with a Credit Card
While there are certainly benefits to paying for your car insurance with a credit card, you should exercise extreme care. Credit cards can be dangerous when it comes to the way they’re used and the way they’re thought of by consumers. A credit card is not ‘extra cash,’ it’s an extension of the money you already have— or at least that’s the smart way of thinking about it.
Putting a payment like your auto insurance premium on a credit card is fine if you pay it off before the next billing cycle, but when that payoff date comes around, there can be a strong temptation to leave the balance and keep the cash you would have used to pay it off. That extra cash in your account may feel good in the short-term, but that debt doesn’t go away. In fact, it will keep building over time.
Meanwhile, your car insurance company may sometimes charge extra fees to take credit card payments.
Additionally, leaving extra debt on your credit card from month to month can result in hits to your credit score. You should always try to keep your total credit utilization as low as possible in order to keep your credit score and credit worthiness high.
Conclusion
There’s no ‘right’ way to pay for your car insurance premium, but there are ways that can make the process easier, more convenient, and less likely to incur fees or lapses in coverage. Overall, the best way to pay car insurance premiums is to pay less in car insurance premiums. That’s where Freedom National comes in, with the best cheap car insurance online. Get a free quote today and get on your way to paying less for coverage!
