Let’s face it, nobody is extremely excited to buy auto insurance. The thought of money leaving your wallet in a flash and all you have to show for it is a piece of paper, or at best a cool iPhone app, that says you’re insured. I mean we all need it, we have to have it (by law), but who enjoys paying for it, right? So how can we budget each month to pay for auto insurance and somehow make ourselves feel good about it?
Depending on your auto insurance company, you will have several methods when paying for your insurance policy. This usually starts with the duration of the policy. Typically you will have either a six month or one year term. The policy is then broken up into installments and those can be monthly, quarterly, semi-annual or annual. Each of these factors affect on how much you pay.
Most auto insurance companies will offer several installment plans and there’s always one easy way to save the most money. PAY IN FULL. Most auto insurance carriers will offer you a decent discount to pay off your policy all at once. You also save on installment fees like being sent a bill each month. A measly $3-$5 monthly charge can add up fast. If you account for the fact that you won’t see a past due notice (since you paid in full) and a charge for being late, it starts to make sense.
So how do you budget and pay for auto insurance all at once? To get a head start you may need some money funding creativity. What I mean by this is selling a few thing you don’t need or possibly picking up some OT. Let’s say you’re able to make this happen and pay all at once, but now you’re worried about paying in full next time. Here’s where you can make it a routine. For example, you have a six month policy that costs $300. You can use that amount as a general rule of thumb that in six months you’ll owe another $300. So even though you just paid in full, you will now start saving $50 each month in a separate savings or envelope, so by the end of six months your insurance is paid for.
Sounds like budgeting 101, and it is. But many of us don’t think of paying our auto insurance in any other way than monthly. We don’t realize that it’s actually costing more in the long run and budgeting for auto insurance actually works. Now will this make you feel any better about having to buy auto insurance? Probably not. But since we have no choice, at least we can feel good about saving money.