Is Pay By The Month Car Insurance Right for You?

Paying your car insurance monthly makes sense if you can't pay the rates for six or 12 months at once. You may be charged extra fees, though.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 15, 2020

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Here's what you should know...

  • Pay by the month car insurance is a good option for customers on a tight budget
  • You will still need to buy third-party liability coverage (and PIP if you live in a no-fault state)
  • You may face additional fees for having a pay-per-month car insurance policy

Pay by the month car insurance is one option for getting the coverage you need. It makes sense when a policyholder has difficulty coming up with premiums for six or 12 months at once. Be sure to ask your insurer whether it charges extra fees in this instance, though.

Enter your ZIP code to get online car insurance quotes for coverage today.

The concept of pay as you go car insurance is fairly new and not yet widely offered. Find out how it works and if it’s right for you.

Can you get pay-as-you-go car insurance?

In most parts of the United States, drivers are required to have car insurance coverage in place in order to drive legally. The minimum level of liability insurance required is set by state law.

A car insurance buyer must have at least this amount of protection in place, but he or she can always choose to buy a policy with a higher limit if desired.

You will need to buy third-party liability coverage to pay for the cost of medical bills and other expenses incurred by the occupants of the other vehicle if you are involved in an at-fault accident.

Even if you live in a no-fault state for car insurance purposes, you will need to have some liability coverage in place to pay for damages you cause in an accident that is over the state threshold for paying out no-fault benefits. Other insurance types include:

  • Personal Injury Protection (PIP) – no-fault car insurance states also require that drivers buy coverage to pay for the medical bills incurred by themselves and the occupants of their vehicle if an accident occurs.
  • Collision coverage – with liability coverage, you can buy insurance to protect your own vehicle. Collision coverage pays for the cost of repairs to your car after an accident. If your car is totaled in an accident, the policy pays out based on your vehicle’s cash value.
  • Comprehensive coverage – protects you for losses other than those caused by a collision. This is the part of the policy that covers you for damage caused by flooding, wind, hail, fire, and vandalism. It also pays out if your car is stolen.
  • Uninsured motorist coverage – pays out when the at-fault driver in an accident does not have insurance. The other driver’s coverage pays out first (up to its policy limit) and then your underinsured protection would be used toward the amount that is still owed.

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Is pay-as-you-go car insurance cheaper?

Many car insurance companies offer multiple payment options to their customers. Paying on a monthly basis is convenient and is the one most likely to fit in with a customer’s budget.

If you decide to pay for your coverage in this way, you may be charged additional fees for the convenience of doing so.

When a car insurance company has to process multiple payments, it incurs higher administrative costs, and these expenses are passed on to the policyholder in higher prices.

If you are able to pay for your coverage on a six or 12-month basis, ask the insurance company for a discount based on the fact that it is saving on the administrative costs associated with your policy.

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Pay By the Month Car Insurance: Compare Rates to Get the Best Pricing

If you want to get the best possible pricing on your car insurance coverage, be prepared to shop around for coverage.

Each company licensed to sell insurance in your state sets its own prices for coverage, even for the same type and level of protection.

By taking the time to get quotes from several companies and comparing them, you can save a significant amount on the cost of your coverage.

To find pricing information from a number of companies, check out free quotes available online.

In many cases, all you need to do to find out how much you will pay is to fill out an online form with some basic information about yourself, your vehicle, and your driving record.

Do you want the convenience of pay as you go car insurance coverage or would you like to get more savings by paying for a longer period at once?

No matter which option you choose, the important thing is that you get a good level of coverage for the money you are spending on premiums.

You can get many free car insurance quotes now by entering your ZIP code.

References:

  1. https://en.wikipedia.org/wiki/Personal_injury_protection
  2. https://www.wikihow.com/Determine-Car-Insurance-Liability-Limits
  3. http://carinsurance.about.com/od/PolicyFundamentals/a/Comprehensive-Vs-Collision-Coverage.htm
  4. https://www.geico.com/information/paymentoptions/auto-methods-and-plans/
  5. https://www.clark.com/how-to-shop-for-auto-insurance

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