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Payment method may boost your auto insurance costs

By Susan Ladika on January 6th, 2012

You may opt to pay your car insurance bill each month rather than in one lump sum to make the payments more manageable, but that strategy could cost you a couple hundred dollars each year.

Many consumers don't do the math when they're considering auto insurance payments. But if you add up what your auto insurer charges you to pay your premium each month and compare it to the lump-sum cost, the difference can be staggering.

For one Florida resident, paying in monthly installments for a six-month auto insurance policy, rather in one upfront payment, cost up to $141 more -- or more than $20 per month. And that doesn't include any extra fees insurers charge for paying by phone, online or by automatic debit from a bank account, which could be a couple of dollars each month.

Florida's auto insurance rates are among the tops in the nation, with the average rate exceeding $1,000 in 2008. But even in a state where rates are half that, you could easily add $5 or $10 to your bill each month by paying in installments and paying the extra fees for the method of payment you choose.

While paying in installments often is the only way consumers can afford to pay for their auto insurance, consumer advocates say it hurts those who can least afford it. Many people live paycheck to paycheck and have to rely on monthly payments.

Consumers typically consider only the premium when deciding which auto insurer to choose. But they should also take the cost of payment plans into account, because they can vary widely.

For the Florida resident, paying in installments cost an extra $141 over six months with one auto insurance company, and only $17 extra with another company, with wide variations in between.

If you're shopping for new car insurance, consider not only the semiannual or annual premium, but also how much extra you'll pay by using an installment plan.

To avoid the problem in the future, now is the time to start setting aside extra money each month. That way, when your insurance is renewed, you'll have the cash in hand to pay your entire bill off as it comes due.

How to score affordable car insurance: auto insurance quotes comparison, discounts, bundling

To get the most affordable car insurance for your particular situation, it pays shop around, do some digging for discounts and to drop unnecessary coverage. You should review your policy each year, and get at least three quotes when doing your annual auto insurance quotes comparison. Additionally, you should research bundling your policies. If you purchase both home and auto coverage from the same firm, you could qualify for rate discounts. By raising your deductible from $200 to $500 you can lower your premium by 20 percent, according to the Insurance Information Institute.

 

 

 

See average annual insurance rates for more than 2,000 vehicles

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