Can you pay your car insurance yearly?

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Here's what you need to know...

  • Auto insurance companies would prefer that their clients pay their policies in full at the beginning of the term
  • When you’re shopping for insurance, you do have the option to choose from different payment installments
  • It’s important that clients who want to pay yearly choose a 12-monthly auto insurance term from inception
  • If you carry a policy term that only lasts six months, you can’t pay for your insurance for a year
  • Your policy must be run for renewal about a month before it renews and you may be charged different rates

When you’re planning to buy a car, you also need to prepare to buy auto insurance. You always have the option to buy warranties or extra forms of protection in the dealer’s finance office, but buying insurance on the car is mandatory.

Since the insurance expense is something that you’ll have to pay for as long as you own a car, it’s something that needs to be incorporated into your budget.

If you’d prefer not to have to worry about making payments every month or every quarter, it might be best for you to pay your premiums annually.

Unfortunately, if you select the wrong policy when you’re applying for insurance, you might not have the option to pay for a year’s worth of car insurance all at once.

Compare quotes for car insurance today by using our free rate tool above.

Here’s what you should know:

Selecting the Right Policy Term

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There’s a lot of focus placed on finding a low-cost insurance quote and very little focus on choosing the right type of term. Just like auto insurers aren’t one-size-fits-all, insurance policies aren’t either.

When you’re shopping for your coverage, you’ll have to decide if you want to buy a six-month term or a 12-month term.

The term of the policy is how long the coverage will remain in effect. When you’re buying personal insurance policies, there are only two different terms to choose from. You’ll either have a policy period that lasts for six months at a time or one that lasts for the entire year.

Policy periods are very important. They protect the insurer from being stuck in a contract that they would like to end.

During the term, the insurance company is obligated to provide you with coverage as long as you’re paying the premiums and you’re always forthcoming with relevant information. At the end of the term, the insurer can then decide if they want to renew your policy.

Do insurance companies sell both terms?

Insurance companies don’t always have to sell both term options. In fact, most companies will only offer you the option to buy one of the two insurance terms. When you’re looking for the right company, you should first check to see what the product offering is. If you’re only offered six-month term and you want to pay annually, you need to look for a new company.

Why You Can’t Pay for a Year with a Six-Month Policy

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If you happen to purchase a six-month policy without first understanding how terms work, you might wonder why you can’t pay for your insurance for the year. The main reason that you can’t is that you’re only billed for policy premiums for the next 183 days rather than 356 days.

Your solution might be to double your premiums, but that still won’t work. Doubling your premiums would only be an effective way to pay for premiums for the next year if the rates were the same the next term.

Since insurers have the option to underwrite your policy and then change your rates at renewal, there are no guarantees that your second six-month term will be the same as your first one.

Making Your Full Payment Upfront

When you’re initially applying for a policy, you have to provide some very detailed information about the following:

  • yourself
  • your car
  • your household

You’ll also be expected to submit your first payment so your coverage is temporarily bound during the underwriting period. If you don’t submit a payment, the coverage isn’t protecting you.

Many people will only pay a down payment upfront to bind their coverage. If you’d rather pay the whole premium at once to get the exchange out of the way you can.

It’s important that you know that the quote that accompanies your application isn’t guaranteed. There’s always a possibility that your final rate could be more or less than you were quoted if there’s misinformation.

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What are the most common reasons that your annual rates will change?

You trust that the quotes that you’re given are going to be accurate. When you’re relying on the estimates that you’re given to make a purchasing decision, you want to be sure that the agent isn’t purposely giving you a low estimate just to get your business.

This is an illegal practice if you can prove that low estimates were intentional.

If you’re misquoted because of missing information, you can’t take any action. This is the most common reason that quotes change when they are assessed and the information is verified.

Typically, the applicant has a ticket or an accident that they didn’t disclose. Sometimes, the difference is because of errors in driver information or because of a digit in the VIN that leads to a different ISO classification.

What happens if your rates change during underwriting?

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If you failed to mention you were recently convicted of speeding or someone in your home didn’t tell you about an at-fault accident, you’re going to have to pay more than you were quoted from the start.

That upfront annual payment that you made for the 12-month term isn’t going to be enough to pay the policy off. You’ll be billed for the difference.

If you’re lucky enough to get some discounts or your rate goes down for an expired surcharge, you’ll be entitled to a refund. Any extra money that you’ve paid for the full premium will be returned to you in the mail.

If you’re billed for additional premiums, you may have to pay a billing fee.

You can pay for your auto insurance yearly as long as you apply for a 12-month term. The only issue with this is that a lot of companies prefer to offer six-month terms. Start to shop around for a longer term now.

Use an online rate quote tool, compare rates, and then pay for the policy you want in full. Enter your zip code below to compare quotes side-by-side.

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