Most auto insurers will give you the option of paying for coverage through monthly premiums instead of forcing him to make one large payment in advance. To decide which option is best, you must carefully review the benefits against the potential drawbacks in light of their personal circumstances. Depending on your financial situation, the need for planning flexibility, and other factors, so the wrong choice can have long-term.
This article provides a roadmap for navigating your car insurance payment schedule. Let's take a look at the advantages and disadvantages of annual versus monthly payments.
Pro: Easy on your monthly budget
If you're like most people manage their finances with a monthly budget. Your income is offset by their accounts, the funds are distributed to the entertainment, investment, and other outings. Under this system of budgeting, making a large down payment for the full year of coverage may be difficult to handle. This is especially true in the current economic climate.
Your monthly insurance payments will be well on your budget. Payments expected to represent a flow has been assigned a financial plan.
Cons: It's uncomfortable
Pay your auto insurance premiums on a monthly schedule increases the paperwork that forced him to handle. Do not just open their statements and file for future reference, but also have to write a monthly check.
On the other hand, many auto insurance companies can help you establish an automatic payment plan. The funds are drawn directly from your checking account on a predefined schedule. It reduces paperwork and eliminates the need to remember to write a check every month.
Pro: Provides greater liquidity
If funds are limited, there is value in having the option to hold onto your money for as long as possible. Monthly payments auto insurance provide valuable liquidity. For example, suppose that part of your monthly budget is intended to make a small investment in mutual funds. If you were forced to pay several hundred dollars up front to a car insurance policy year, you may lose the necessary liquidity to make their monthly investments.
Cons: Processing Fees Includes
Most auto insurers charge a small monthly fee to process your payments each month. These processing fees are small, it is not uncommon to be as low as a few dollars each month.
In the course of a year, the rates can add up to $ 50 or more, depending on your policy. While some financial planning experts suggest that pay fees as a way to spend money recklessly, which depends largely on your personal circumstances. If funds are unlimited, the experts are correct. This small fee may be worth taking into account the liquidity of the system offers.
Pro: More flexibility
Make monthly payments gives you much more flexibility to change the car insurance would be the case if I had to pay in advance. This is more important than many believe insured.
Auto insurers are constantly trying to gain market share. Using a key lever to reduce premiums. This is one of the reasons that regularly should shop for a new policy. Even if you are unhappy with your current auto insurance, you may find a policy that offers more attractive terms. You may be able to get the same coverage for less money through a competitive car insurance company. You might also find that you can get more insurance coverage for the same payments they are already doing.
If you cancel your car insurance policy after paying in advance, you will receive a prorated balance of your current insurer. The problem is you have to wait for the check, which can take weeks. You may need to make a deposit into your new insurance company, which could be a problem waiting for a refund before. It's much simpler to cancel your coverage and to change providers when you are paying for your monthly insurance coverage.
Choosing the right payment schedule
You are the only person who can decide whether the payment of automobile insurance in a monthly schedule is appropriate for your situation. Check your monthly budget. Determine the value placed on liquidity. And consider the importance of being able to easily switch providers if they find best auto insurance rates elsewhere in the coverage you need. A little planning ahead can help avoid headaches down the road.
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