Is it a bad idea to pay monthly for auto insurance instead of in full?

No, it's not a bad idea to pay monthly auto insurance instead of in full. Monthly payments make it easier when you can't afford a sizeable lump-sum cost at the start of the auto insurance policy. You can save up to 45% on your insurance policy when you qualify for multiple car insurance discounts. Shop around and compare various companies to secure affordable monthly auto insurance rates instead of paying in full.

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Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and Cinncinati.com. ...

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Reviewed by Rachael Brennan
Licensed Insurance Agent

UPDATED: Sep 9, 2021

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Can't-Miss Facts

  • Paying your auto insurance in full can get you a discount
  • Most auto insurance companies require a deposit to start your policy
  • Monthly payments can provide short-term savings
  • On average, you could pay at least $48/mo for auto insurance

Is it bad to pay monthly auto insurance instead of in full? It depends on your budget, but paying in full comes with a discount.

Paying monthly for car insurance makes it easier to make payments, but will you pay more by the end of the year? Don’t worry – we’re here to help.

Our guide explains how you can save by paying auto insurance rates in full. Also, we’ll list the average car insurance cost per month at the best companies and explore the pros and cons of paying in full.

After you learn the details about paying monthly auto insurance instead of in full, enter your ZIP code in the free online quote tool above to compare multiple companies near you.

Is it bad to pay monthly auto insurance instead of in full?

The short answer is no. Paying monthly car insurance rates saves you from spending a lot of money at one time. Meanwhile, paying in full eliminates any future monthly payments.

Also, paying in full provides you with an auto insurance discount. Continue reading to learn more about car insurance deals when you pay in full.

Can I receive an auto insurance discount for paying in full?

Pay-in-full car insurance discounts vary for each company. But you can save up to 10% on auto insurance when you pay off the total balance.

You can also save at least 2% by opting to receive all of your paperwork electronically.

These are only a few discounts. Think about all the bargains you receive when factoring in personal characteristics.

But first, let’s look at the average monthly cost of car insurance at the best companies and compare it to the semi-annual and annual expenses.

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What is the average cost of auto insurance?

According to the National Association of Insurance Commissioners (NAIC), the average cost of car insurance is $90 a month for full coverage and $48 per month for liability-only coverage.

However, auto insurance varies for each person. One of the main factors of car insurance is where you get your policy.

Let’s compare auto insurance costs based on the best insurance companies in the United States.

Monthly, Semi-Annual, and Annual Auto Insurance Rates by Company
CompaniesMonthly Auto Insurance RatesSemi-Annual Auto Insurance RatesAnnual Auto Insurance Rates w/ Pay-In-Full Discount
Allstate$318$1,719$3,438
American Family$224$1,212$2,424
Farmers$288$1,557$3,115
GEICO$179$966$1,931
Liberty Mutual$398$2,148$4,297
Nationwide$229$1,236$2,472
Progressive$283$1,527$3,054
State Farm$235$1,270$2,539
Travelers$287$1,551$3,103
USAA$161$870$1,740
Average$260$1,406$2,811

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These car insurance rates are based on a clean driving record. Meanwhile, we applied a 10% discount on the semi-annual and annual costs for each company.

Based on our research, USAA, GEICO, and American Family are the cheapest auto insurance companies in the nation.

Do I need to make a deposit on auto insurance?

The answer is yes. Some car insurance companies require a deposit to start your monthly payments.

For example, GEICO’s payment options start with a deposit, which is at least 10% of your annual insurance coverage. After that, you can arrange monthly or semi-annual installments.

If you decide to pay your balance in full, you can receive a discount.

What factors can reduce the cost of auto insurance?

Several factors determine whether affordable car insurance is available to you. Here are a few characteristics that lower auto insurance rates.

  • A clean driving record
  • Good or excellent credit score (739 or above)
  • Low annual mileage
  • High deductible
  • Age (over 24 years old)
  • Multiple policies on your insurance
  • The vehicle comes with several safety features

These characteristics can generate more affordable car insurance quotes. With the right insurance company, you can save up to 45% on auto insurance.

Why are auto insurance rates more expensive for monthly payments?

You’ll notice that all the monthly car insurance rates combined are more expensive than the amount issued at the beginning of your policy.

That’s because auto insurance is affected by an APR (annual percentage rate). But how does that work?

Let’s say, for example, that you have an annual insurance policy of $1,500 when you pay in full. But your car insurance company has an option where you can pay $775 twice a year.

That means you’ll pay $50 extra for the year. The $50 attached to the total balance ($1,500) allows you access to auto insurance at $750 at the next pay period.

The APR is double the percentage when you divide $50 into $750, which is about 14% (7% every six months).

To figure how much that calculates to each month, divide 14% by 12. That’s about 1.17% added to your monthly car insurance rates. Paying your bill in full eliminates the APR and provides a discount.

Can I receive a refund if I cancel my auto insurance?

It depends on when you cancel your policy. If you just bought your car insurance policy, you can change your mind and cancel. Since you’re within the underwriting window, you can get a full refund.

However, canceling your auto insurance policy after four months will affect your refund.

For instance, you won’t receive 100% of a $2,000 insurance plan that’s paid in full after using your policy for five months.

The auto insurance company will refund the remaining months, which would be $1,169 before cancellation fees.

What are the pros and cons of paying for auto insurance in full?

Although you can save money on car insurance when you pay in full, it has a few drawbacks. Let’s look at a few pros and cons of paying your insurance policy in full.

Pros:

  • Paying car insurance in full can get you a discount
  • No monthly or semi-annual payments
  • You can skip a deposit
  • No APR on auto insurance

Cons:

  • A lump-sum payment can affect your overall budget
  • You won’t receive a full refund if you cancel within several months of the policy

Paying in full may save you money for the long term, but it may not be helpful in your specific situation.

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Is it a bad idea to pay monthly for auto insurance instead of full?: The Bottom Line

Paying your car insurance in full isn’t a bad idea. Review your finances carefully and make sure you can afford a large down payment.

Qualifying for several discounts when you get a quote can slow down expensive rates. Ultimately, the more deals you’re eligible for, the less you’ll pay in full or per month.

Now that you know more about if it is bad to pay monthly auto insurance instead of full, use our free online quote tool to compare multiple insurance companies in your area.

Frequently Asked Questions: Is it bad to pay monthly for auto insurance instead of full?

Do you want to know more about other factors in monthly car insurance? Read the answers to these frequently asked questions to learn more.

#1 – Does my credit score affect auto insurance quotes?

The short answer is yes. Car insurance companies correlate credit scores with risk. The better your credit score, the less risk for filing claims.

#2 – How much can I save on auto insurance when I have a speeding ticket?

Speeding tickets have a small impact on car insurance rates, but they increase your rates by at least 5%.

#3 – Will my auto insurance go up after three months?

Yes, it can. One of the drawbacks to paying monthly is car insurance increasing after a few months.

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