Is Paying My Car Insurance in Full Worth It?

WV & OH ONLY

"I can afford to pay my whole car insurance bill at once this year. Will it actually save me money, or should I keep making payments?"

Not everyone has a lump sum sitting around, and there's no shame in that.

Paying your car insurance in full often costs less than paying over time, though not with every company and not by the same amount. It makes sense when you can spare the money without leaving yourself short for something else. Ask to see the total cost both ways, because that comparison tells you what you need to know.

It'd be nice if it were cheaper no matter how you pay. Paid in full or monthly, we're chasing the best rate for you.

Companies treat payment choices differently. One may reward paying in full and another may barely care, so the company that's cheapest on payments may not be the cheapest paid in full. With 13 companies to check, we can price it both ways.

Here's my angle: I'd like your business. If you've got a tax refund or a little extra sitting there, give me ten minutes before you spend it. I'd like you to know what it can do.

WV & OH ONLY

Look at it from the company's side. Each bill has to be created, sent, tracked and collected. Each one is also a chance for a payment to come back or never show up. When you pay once, most of that goes away.

The company has its money, it doesn't have to chase you, and it doesn't have to worry about canceling you halfway through. Many companies share some of that savings with you.

Not always. Some companies build it into the price in a big way, and with others you may see little difference. Sometimes the difference is in the way the policy is priced from the start, so it won't show as its own line.

That's why I don't answer this one from memory. I'd rather look at your actual quote.

Add it up. Ask for these numbers:

1. What the policy costs if you pay all at once

2. Every payment you'd make the other way, including any charges for billing

3. How long the policy runs, so you're comparing the same stretch of time

Subtract the first from the second. That's what the convenience of paying over time costs you. Then decide whether it's worth it.

When it wipes you out. If the bill empties your savings and the transmission goes next month, you didn't save anything. You may end up borrowing at a far worse rate than what you saved.

Your deductible matters here too. If you have a wreck, you'll need to come up with that money before you can get your car fixed. I'd want you to be able to cover it. Don't spend your emergency money on a premium and then find out you can't afford your own deductible.

You can cancel. The Ohio Department of Insurance's guide says you have the right to cancel at any time, but you may face a fee or penalty for doing it mid-term. Ask how a refund would work before you pay.

If you sell the car, don't assume the money just stays put or comes back on its own. Call and let's move the coverage or work out what you're owed.

It takes away the most common way people lose their insurance by accident. No payment due means no payment to forget, no card that expired, and no notice lost in the mail.

If your income is uneven, like seasonal work or overtime that comes and goes, that may be worth more than the savings. It's a good use of a good month.

Ask. What's on offer depends on the company, and I'd want to look at your own quote before saying anything about yours. Sometimes paying more up front helps and sometimes it doesn't change a thing.

Got the money set aside? Let me price it both ways before you decide.

WV & OH ONLY

Next in the series: Part 33, What Happens If I Miss a Car Insurance Payment?