Can someone explain how car insurance works?

Question

Specifically, how do you pay for auto insurance? Do you make monthly payments or do you pay it at one time?

Answer 1

Well I pay by the 6 month period because I get a discount that way.

I suggest that you go online to progressive.com where they will give you the rates of several different insurance companies even if their rate is higher for comparison.

I am currently signed up in a program with them where they send me a chip to install in two of my vehicles and it records how many miles I drive and some other statistics for a program they are recording. I get several hundred dollars off each vehicles insurance and the program is for a new type of insurance where in the future you will pay by the number of miles you actually drive instead of a set rate which to me is the way it should be. The more miles you drive the more likely that you might be in an accident.

I have used all kinds of insurance over the years and progressive seems to have more bang for the buck and incentive programs for accident free drivers.

Happy Motoring!!

Answer 2

Car insurance is a product. The product is normally sold for a certain time period - sometimes six months, sometimes twelve, occasionally three.

If you choose not to pay for the product (policy) in full, then most states require the insurance company to offer you a payment plan, which would include finance charges. Payment plans could be monthly, bimonthly, quarterly, semi-annual, or annual.

Keep in mind, the payment plan is a SEPERATE transaction than the policy - kinda like, when you buy a car, you buy the whole car, and pay monthly payments to the bank, but just because you stop making payments doesn't mean the car isn't still yours - and they can come back after you LONG after the car is repo'd, for any balance due.

Answer 3

You can do it both ways. Automobile insurance comes in 6 month policies. Most people cannot afford six months at a time, so they pay monthly. To do it this way, you have to come up with a down payment, which is typically twice each monthly payment. There is often a slight discount for those who pay for the entire 6 months up front. Most insurance companies will let you set up an automatic payment plan with your bank, and they will provide a slight discount for this. For those who are unable to come up with a down payment, there are monthly policies available, but in the long run they are much more expensive.

Answer 4

You can either pay for auto insurance for a month at a time (which means you're ultimately paying more because you're also paying interest) or for several months at a time (usually 2 months, 3 months, 6 months, or a year). An interesting clincher to auto insurance is that it ultimately compensates the other driver in an accident, not you -- the logic behind insurance against those who have no insurance. THEN it goes to court. Of course, if the other driver has insurance, reimbursing you is the other's company's responsibility.

Have a great day!

Answer 5

well... actually it is the biggest scam ...it is a conspiracy against you which was created by DMV and insurance companies to get the most money out of you... you are paying for the "just in case" events

OK. this is the real answer, you can choose to pay either way. If you choose to pay in full when you signed up, you will get a big discount which between 10-20% of the premium depends on the company. When you pay monthly payments, the company will add "service or billing fee" which will add a few extra $ to your monthly premium can be as high at $15(fee) per billing.

My suggestion, if you have the dough.. pay in full if not... you will have to bite the bullet and let them screw you monthly..he he

Answer 6

You can either pay for auto insurance for a month at a time (which means you're ultimately paying more because you're also paying interest) or for several months at a time (usually 2 months, 3 months, 6 months, or a year). An interesting clincher to auto insurance is that it ultimately compensates the other driver in an accident, not you -- the logic behind insurance against those who have no insurance. THEN it goes to court. Of course, if the other driver has insurance, reimbursing you is the other's company's responsibility.

Answer 7

I pay monthly, its automatically taken outta my account so I dont have to worry.

Dont get Full coverage unless you are required to, you will if you're making car payments. If your car is paid for, get liability + collision. What I do is double the pay-outs for damage and injury so if I hit a mercedes or if someone is really injured its pretty much covered. It costs allot less that way.

If you own a home or have renters insurance, you get a discount with the same ins. It also costs less if youre over 25, and even less if youre married. Expect to pay higher premium if youre single, young and havent driven long so keep your record squeeky clean for future breaks in costs.

Good luck!

Answer 8

The length of your policy, the amount of your payment due and how often it will be due will all vary by insurance company.

Some companies will only deal in 6 month policies, some will also sell 1 year policies which will usually save you a bit of money. How often you pay can be affected by many different things. Some companies will check your credit, if you have bad credit they may require that you pay all or a big portion up front. Some will consider how long you've had insurance previously, if you have, and use that as a factor in determining your worthiness to pay. They are also going to determine what coverages you have (just the required minimums, collision and comprehensive as well, what deductibles you may have), and depending on what your total due is, you may be able to make payments monthly or quarterly if you are not deemed high risk because of an expensive policy. You will also most likely pay a small premium if you want to set up monthly or quarterly payments, or your insurance company will offer a discount if you pay all up front. Either way it's almost always cheaper to just pay the whole policy at once.

How you pay is also dependent upon the company and their specific process. Some will require you to have a checking account or credit card that they will automatically charge monthly in order for them to allow you to make payments. Some will let you just send a check or come down to an office and pay by check/cash/credit card. Others give you a full range of options including pay online or by phone, coming into an office, mailing in your payments or a automatic monthly payment.

You'll find that the "economy" insurance companies are going to be more flexible about allowing you to make monthly payments, but the rates will be higher in comparison for the actual coverage you're getting, and they will probably require you to have an automatic withdrawl because they usually deal with 'higher risk' customers when it comes to payments.

Answer 9

There are two flavors of car insurance. All insurance is based on the proposition that spreading the cost of a risk over a large number of people is the cheapest way to pay for the damage when the event happens.

Insurance companies insure your car and then pay insurers like Lloyds of London to insure they don't have to pay a huge amount for any one claim.

Your insurance company pays you or the person whose property (car or telephone pole) you damaged in the event of an accident.

In some so-called "no-fault" states, your insurance company pays you, regardless of who is at fault, and the insurers determine who is at fault. The at-fault insured pays a higher premium for his insurance.

In some states, persons who have accidents are forced into a "high-risk" pool and pay a lot more for insurance. This is called cherry-picking, since the insurers only insure people who don't have accidents.

These last two turn insurance on its head because politicians can't grasp the essential function of insurance and want to lower premiums for their friends, who never have accidents.

Answer 10

Car insurance costs a certain amount every 6 months. You can pay the whole 6 months at once, or you can choose to finance that amount. Up to you entirely.

Most insurance companies charge a small fee for financing the money for you, and you make monthly payments.