Discounts for Paying Your Car Insurance in Advance

Many car insurance companies offer discounts for paying your car insurance. Even if you can't afford to pay your annual car insurance rate in full, paying for a few months at once can save you money on your car insurance rates in the long run. Enter your ZIP code below to get a free car insurance quote so you can find the cheapest annual rates.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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: Jan 21, 2021

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Here's what you need to know...

  • You can get a reduction on your rates if you pay the full amount of your premium ahead of time
  • Paying in installments can get you a discount depending on the length of the installments
  • If you can afford it, a 12-month policy can get you a better discount compared to a standard six-month policy

If you are like most drivers in the United States, you pay for your car insurance premiums either on a monthly payment plan or in two to three installments per year.

This plan is so common that it is becoming harder and harder to find individuals who pay their entire policy amount upfront.

But did you know that a pay-in-advance car insurance discount is common from many companies? It’s true. Car insurance providers are happy to offer this discount for a number of reasons.

As the cost of car insurance continues to rise from year to year, any discounts you can get are immensely helpful. If you can take one six-month policy period to set aside the money to pay for the next policy period in advance, you could save a little bit of money.

Although it may not be more than $25 or $30 every six months, over 30 years of paying for car insurance it can add up to quite a bit of money.

While you’re here, why not enter your ZIP code in the box above to start searching for affordable car insurance rates online?

Several Options

There are several different options for insurance companies when offering this type of discount.

  • Pre-paying for the whole policy
  • Paying for your policy quarterly or every six months
  • Paying for your policy monthly

The first option is a straight-up rate reduction if a policyholder pays the full amount of his premium ahead of time.

This type of discount offers the highest premium reduction among all the options. In many cases, it also means paying your insurance premiums 30 to 60 days prior to the start of the new policy term.

The other two options come by way of the fees assessed by insurance companies for installments. In other words, if you can’t pay your premiums in full ahead of time, you may choose a plan of several installments or a month-to-month billing option.

In either case, your car insurance company is quite likely to charge you an administrative fee for the convenience of installments. In most cases, that fee will be lower for a two or three-payment installment plan than it will be for a monthly billing plan.

The idea here is to encourage policyholders to have their premiums paid in full as soon as possible. When you think about the insurance company’s position, this makes perfect sense.

An individual who pays via a monthly billing cycle provides the least amount of money the insurance company can turn around and invest to make a profit. That means a greater potential for loss should the driver make a claim.

On the other hand, if a policyholder has his premiums paid in full within the first month or two of the policy term, that gives the insurance company more money over the next several months to invest.

That reduces the risk of loss to the insurance company should the policyholder file a claim.

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Paying with Credit Cards

There are many American drivers who have elected to pay for their car insurance via credit cards. Most often this is done because it allows customers to choose a recurring billing option, thus avoiding the hassles of having to pre-plan for insurance premium payments.

However, depending on how much of your credit card bill you pay every month, and the interest rate you’re being charged, paying your insurance this way could potentially wipe out any pay in advance car insurance discount.

Although credit cards are good tools in some cases, there are better ways to pay for your car insurance premiums.

If your insurance company allows a recurring payment option linked to your bank account, you’ll get maximum benefits from a pay in advance discount.

It simply requires you to set aside a little money every month so that when the bill for the next term comes due you have the cash available.

Pay in Advance Annually

Almost all car insurance companies work on a six-month policy term model. That means every six months your policy will be renewed, and you will receive new documents and ID cards.

But it is possible in some cases to get a 12-month policy term and pay in advance for it. If your car insurance company does offer this option, it’s the best way to maximize a pay in advance car insurance discount.

If your company doesn’t provide such an option, the discount on the standard six-month policy term is better than nothing.

Pay in advance car insurance discounts are a good thing, indeed. But even without the discount, paying car insurance in advance just makes good financial sense.

You won’t incur installment fees, high-interest rates from credit cards, or other extra costs that come with pay-as-you-go.

Before you think about paying in advance, you need to shop for competitive car insurance rates by entering your ZIP code below.

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