Car Insurance Payment Options With Their Advantages And Disadvantages
Although most car insurance companies want to receive premiums upfront many of them allow instalments. Naturally drivers may want to spread the payments over a few months for several reasons. In fact some people may just not have the money right now to pay the full premium at once and they might prefer to spread it out. This option might seem to be favorable and some consumers might see it to be smarter move instead of paying upfront. However paying the whole amount at the beginning might offer discounts and most importantly spreading premium out might come at a price.
Fundamentally insurers would love to receive payments upfront as this reduces the risk of policyholder defaulting or cancelling and going to cheaper providers mid term. Another important issue arise when car insurance companies make a claim payment. They would not surely be happy to make the claim payments and find out later that policyholder will not continue paying premiums until the end. But some insurers have a solution for this possibility and they might actually ask the full payment once the claim is made or deduct the outstanding amount from claim payments. Logically insurance policy would have served its purpose and full premium should be payable once a claim made.
Naturally insurers would not like to lose customers to their competitors for the sake of getting money a bit later. Besides there are a few financial institutions helping them set up payment plans to suite customers. Still allowance of instalments might come in various forms throughout the industry. Some companies might want to take it just like a credit agreement and look at the credit score of the applicant before agreeing. A few of them might have better arrangements for their renewal policyholders but not offer these favorable terms to new customers. And others might allow only limited instalments like next 5 months instead of full 12 months spread. Again some might require sizeable down payments and leave the rest to be paid at a later date while others allow equal spread. If payment method is important to drivers they should enquire the options when they are getting quotes.
While low start payment options could help many drivers on a budget they come with some shortfalls and disadvantages. First of all most companies add interest or surcharge on top of the premium when it is spread over a few months. So total premium amount paid would be reasonably higher than what was quoted at first. Secondly many drivers might not really be making the most of it but they could actually get discounts when they make one upfront payment. It is always worth making such payments conditional to getting further discounts as it would work with most insurers. Another vital point is the risk of coverage being cancelled due to non-payment of subsequent instalment. However people could minimize that risk buy setting up an automatic bank payment system.
Ideally drivers should try to pay the full amount at the start and get all the discounts they can. Understandably this option might not be open to many low income families. Then they should take the instalment arrangement charges into account when they are choosing an insurer. While a company might be slightly expensive if they have flexible payment options with no charges they might end up being a better quote.
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