Avoid Making Late Payments
Late payments can not only throw your budget off balance, but can also cause your insurance premium to go up. If you’re very late, many car insurance providers will put a temporary hold or cancellation on your policy, meaning you might not have coverage during that time period. The policy will have to be re-instated once your payment has been made, and there may be late fees as well. If you are continuously late on your bill, the provider might refuse coverage in the future. This could hinder your opportunities later down the road to get affordable car insurance. It pays to pay on time!
Figuring a Budget
Just as with any other bill, figure how much your car insurance payments are on a monthly or quarterly basis, unless you normally pay a lump sum each year. If paying a quarterly bill, you’ll still want to plan for it monthly and maybe even weekly depending on how you are paid by your employer.
Budgeting monthly means you’ll put back so much per month in order to accumulate enough money to pay the quarterly bill. Let’s look at a real number example to see how this works. If your yearly car insurance bill is $1,800, divide this by four to get your quarterly amount. This equals $450 per quarter. Take the figure $450 and divide it by three to get a monthly amount. This equals $150 for a monthly payment. If you make quarterly payments, you’ll need to set back $150 per month in a checking or savings account until your quarterly bill arrives.
You might also want to put back an amount weekly to save the trouble of coming up with a larger monthly amount. In the example above, you would take the annual amount of $1,800 and divide it by 52 weeks. This equals $34.62 per week that you would need to save out of your payroll check.
Direct Draft Payments
Consider direct draft payments if you’d rather pay your car insurance premium automatically. Some providers will do this on a weekly or monthly draft, while others might do the draft quarterly. Either way, you’ll need to be sure enough money is available in your bank account for your payment on the date that it’s set up to be drafted. This option works well if you’re good at keeping a budget and have a steady income flowing in each week or month. Otherwise, automatic bank drafts can cause headaches if you’re already living on the edge with your finances.
The important thing to remember is that car insurance premiums are a very real part of your budget. These bills shouldn’t be ignored until the last minute. It’s required by law that you keep insurance on your vehicle. So, paying your premiums on time should be a priority in your finances.
Ask your auto insurance company about various payment options. Some offer more than one way to pay your bill. If you’re signing on for car insurance for the first time, this gives you an opportunity to start afresh with budgeting. You’ll have peace of mind by setting up a payment plan and budget that works for you!