The vast majority of people with car insurance pay their premiums monthly on the installment plan. While the practice has become commonplace, there was a time when installment payments weren’t an option – until insurance companies discovered that people were more likely to purchase coverage if they could pay smaller amounts each month.
Paying via monthly installments is especially popular with people on a budget due to the increasing costs of coverage. The average policy holder doesn’t have an extra $1,000 to $2,000 to spend all at once, but there are a number of benefits to paying a car insurance bill in full.
Some insurance companies offer discounts for paying a car insurance bill in one lump sum. It ensures there’s no lapse in coverage and eliminates a number of fees that insurance companies routinely charge people that take advantage of installment payments. Those fees include:
- Carrying costs – These typically refer to interest and dividends that the insurance company “loses” by not having the full premium amount to reinvest as a means of increasing profits.
- Administrative costs – These are fees insurance companies charge for processing monthly premium payments and sending clients a monthly bill whether it’s online or through the mail.
- Fractional payers – Simply put, it’s someone that pays their insurance in monthly installments and insurance companies assess fees against them in the fear that they may stop paying or buy a policy with a different company.
- Convenience fees – As it indicates, they’re charges for offering the convenience of installment payments.
Paying car insurance in installments is convenient, helps people budget more effectively, and enables people to obtain insurance that might otherwise be unable to afford it. However, as with all industries, convenience comes at a cost. Paying the full amount will provide savings on a variety of fees. Be sure to find out if there’s a discount for paying in full.
For more information about how The Sena Group can help you with any
of your insurance needs, please contact us at 561-391-4661.
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