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Paying Monthly or Annually for Car Insurance – Which is best Paying Monthly or Annually for Car Insurance – Which is best

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Paying Monthly or Annually for Car Insurance – Which is best

Published 15th August 2017Read Time 12 min

Should we pay monthly or go all-in?

When it comes to car insurance, most providers will give you two options for paying: in monthly instalments or one lump sum when taking out the policy. While paying on an annual basis tends to be cheaper and helps reduce your car insurance costs, depending on your individual circumstances, there may be an advantage to paying monthly.  

Benefits of Paying Car Insurance Monthly

Paying monthly will mean spending a little more for cover, as interest will be applied to each of your monthly instalments. However, suppose you are someone who has to stick to a particular monthly budget, for example. In that case, if a new driver or a family is trying to avoid a larger dent in your bank account, paying monthly will help you spread out the total cost of coverage. 

In addition, if you are on a strict budget, paying in monthly instalments will help you avoid putting significant financial strain on your bank account at the time of your next renewal.  

Confused about car insurance? Read our blog on Understanding Car Insurance Lingo. 

Benefits of Paying Car Insurance Yearly

While opting to pay your insurance annually will mean that you pay a much larger sum up front, it will work out cheaper in the long run as you can avoid the interest rates charged on monthly instalments. If you are in a position where paying annually won’t lead to unnecessary financial stress, then doing so can help reduce the cost of insurance for you.  

Just like the decision on whether to purchase comprehensive or third-party fire and theft insurance, the decision on paying annually or on a monthly basis will depend on your own individual circumstances. Even if you’re not in a position to pay in one annual lump sum, there are some other things you can do to reduce the cost of your car insurance, such as increasing your voluntary excess, which can help reduce the upfront cost of insurance but will mean you pay slightly more if you ever make a claim. 

 If you’re in the market for insurance, check out AA Car Insurance for a great deal on a quote online. 

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