A “service charge” has been added to your monthly auto insurance bill and you’re wondering what it is. we’ve got you covered.
Some insurance companies charge a fee for each monthly payment if you don’t pay the policy in full.
Reading: What is an installment fee for car insurance
An installment payment service fee generally covers the cost of processing your payment on a monthly basis. To avoid paying this monthly service fee, you can pay it in full when you purchase your auto insurance policy.
Here’s what you need to know about an installment fee.
why do insurance companies charge installment payments?
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Insurance agencies use premium installment charges to cover administrative costs associated with more frequent payment processing. more insurers offer one-year, six-month, or one-month payouts on auto insurance policies.
The best advantage for the insurer is that you pay your entire annual premium at once. this means less payment processing but also more cash flow for them. Essentially, by paying up front, you’re lending the insurer money for up to a year at a time.
If you choose a monthly payment option, the insurer does not receive the full amount up front and has to spend more time and effort processing more frequent payments.
how much are you paying in installments?
The answer to this question depends on how you’re paying your monthly payments.
If you call or log into your account every month to set up the payment, you’ll pay an installment fee of about three to five dollars.
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Like Geico, many insurers charge a much lower premium rate ($1 instead of $5) if your payments are set up to be withdrawn directly from your bank account, also called an electronic funds transfer (EFT).
the final result of the installment payment charge
Should I prepay annually or choose a monthly payment option? which one is best for you depends on your financial situation.
Paying in installments each month helps some people budget more effectively. for others who are comfortable with the full annual payment, they get the benefit of saving or reusing the money they save in installments.
Check with your insurance agent to determine the insurance installment rate if you choose to make monthly installment payments. Don’t forget to ask about autopay discounts, as well as other discounts you may qualify for. use this information to decide which payment plan is best for you.
If you’re having trouble affording your insurance, check out our expert tips on how to get the cheapest auto insurance without sacrificing coverage.
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