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The Truth About Monthly And Annual Car Insurance

American Government Special Collections Reference Desk

The Truth About Monthly And Annual Car Insurance

Andrew Scherer
October 1, 2011

Copyright (c) 2011 savvycontent.com

Majority of car insurance companies offer you different choices on how you should pay for your coverage. You can either pay monthly premiums or make one bigger upfront payment. In order to decide what option you should take, you must carefully examine the advantages against the potential disadvantages considering your personal requirements. Based on your current financial situation and other factors, you must make a good choice otherwise there will be long-term implications.

Most people manage their budget on a monthly basis. The money that you earn is offset by your expense through your household bills. Residual funds are mostly allocated for investments, entertainment, and other expenditures. With this type of budgeting method, putting forth a huge upfront payment for an entire year's coverage can be unmanageable. With today's economic climate, that option is even more difficult. A monthly insurance payment system can be more accommodated by your budget. The payments signify an expected expense that is already indicated in your budget plan.

Paying your car insurance premiums every month increases the paperwork that you need to manage. You have to organize your statements and file them for future use, and you also need to write a check every month. Meanwhile, a lot of car insurance companies can assist you in establishing an automatic payment system. The money will be transferred directly from your checking account at a predefined date. That could considerably reduce your paperwork and you would not need to write a check every month anymore.

If you have limited funds, it is better for you to hold on to your money, the longer the better. By paying your car insurance premiums monthly, you are able to enjoy better liquidity. For instance, you have allocated a certain amount in your monthly budget for making a small investment in mutual funds. If you have to pay a big upfront payment for you annual car insurance policy, it might take away some of your liquidity that you could used for your investments.

Generally, car insurance companies demand a small monthly processing fee. The processing fees are usually small to even just as a few dollars every month. Throughout the year, those fees will add up to a certain amount based on your policy. Even though some will argue against paying those monthly fees, it actually depends on your financial situation. If you do not have issues with funds, perhaps those suggestions may be correct. On the other hand, these small fees are worth paying for people who want to maintain some liquidity.

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