Budget Concerns: How Much Insurance is Enough?

Why Your Method Of Payment May Earn You Insurance Discounts

18 May 2016

Dustin Duncan

Every motorist is on the prowl for new ways of saving on auto insurance. You might have covered every possible trick in the book, but did you know that your method of paying for insurance may also be a factor in the eventual cost of your coverage? Here are three methods of payment that may entitle you to discounted rates:

Paying In Full

This discount is possible because insurance companies encourage people to make upfront payments instead of tiny regular payments. Making numerous payments costs the company money because they have to process each payment you make, irrespective of the amount. Imagine a thousand motorists making monthly premium payments versus the same motorists making yearly payments; the latter is obviously cheaper to handle.

Additionally, if you are making monthly payments, there isn't a guarantee you will not default later in the year. Paying your premiums in full removes this uncertainty and your insurer may reward you for it with a discounted rate.

Automatic Payments

You can enjoy a further premium discount by setting up automatic payments. For example, you can set up an automatic payment arrangement using Electronic Funds Transfer (EFT). This is a banking arrangement that transfers money from your account to the insurers account at predetermined dates without further action from you, your insurer, or the bank. The main advantage is that such paperless payments are cheaper to process, especially since you will be dealing with the same payment process instead of using a different payment every month. Also, the payments are guaranteed as long as there is money in your account.

Early Payment

Finally, you may be able to enjoy further discounts by making early payments instead of waiting until the last day of your current policy. Take the example of two motorists whose auto insurance policies are set to expire in 60 days. One motorist renews their policy 60 days in advance while the other waits until the last day. In such a situation, the insurer is likely to favor the one who made the early payment. You can even set up automatic renewals, which guarantees your loyalty to the insurance company.

How have you been making your payments? Does your insurer have a preferred medium of payments? Analyze these questions, talk to your agent, and ask yourself where you can make an adjustment to enjoy the discounts. You might just realize that you have been losing out on discounts that are just begging for your pickings.

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