Auto insurance bills are anything but cheap, and a majority of people wish they had an easier way out. It is common knowledge that adequate insurance is mandatory and driving without insurance is illegal, which rules out not buying insurance or buying inadequate insurance. The consumer has to thus shop around and find a good auto insurance deal in order to pay the least towards his/her auto insurance bills.
Auto insurance companies are corporations which don’t really work as per their consumers’ desires, but on the basis of profitability. These companies took into consideration the need for monthly payments and worked out a plan which is in the benefit of the company as well as the consumer.
Monthly payments
Auto insurance companies have insurance tenures of 3, 6, 9, and 12 months, for which customers need to make a full payment. In recent years, these companies have introduced an installment payment plan wherein customers could pay their insurance premium in monthly installments along with associated fees such as interest and billing fees. In this way, a customer who cannot afford to pay the entire premium at one go can opt for monthly payments based on his convenience. The insurance company also books a profit in terms of the additional fees that are charged to the customer.
How to monthly payments work?
Most customers’ find it difficult to pay up $1000 as a onetime fee and prefer to repay the amount through the tenure of the policy. The insurance companies lose out on two things when a customer opts for monthly payments; financial gain, and assured business. A customer who makes a total down payment, gives the company the liberty to use it as they deem fit, be it investment in better businesses or simply an investment with a financial company that will get them a substantial interest rate. A customer who opts for monthly payments has no commitment to the company and can withdraw their business at any time as compared to a customer who has paid their premium for the whole year is not at all likely to take his/her business elsewhere.
These factors make monthly payments a bit of a liability for the Insurance Company. This liability is translated to the customers’ via increased fees. The insurance company thus levies an interest and/or a billing fee on the customer. The billing fee generally is in the range of about $10 per month. The applicable fees increase their net financial commitment to the insurance company, but this is broken down over a period of 12 months, and is hence much more affordable.
The drawbacks of one time payments
Most financial experts will tell you that one time payments are certainly the way to go and can help you save hundreds of dollars in some transactions. A customer who pays their insurance premium at one go is an asset to the company, and will be in a position to bargain for a better discounts during renewal. The customer can bargain for a lower premium or better cover for the same premium. Another major downside of monthly payments is that delayed monthly payments attract high penalties and lapse of cover.
To decide what’s best for you, it is imperative that you analyze your financial situation and decide if you can afford the onetime payment. If you can, then that’s the way to go.
