My previous blog post discussed the big auto insurance discount & price savings you get for paying your car insurance in full. However, many people cannot afford to pay their auto insurance all at once. Here are some tips on how to shop and save money on auto insurance by comparing payment plans, & how you can avoid or reduce installment fees.

Follow these steps:

1. Decide how much you can afford to pay for your insurance.

Does your income & budget require you to pay monthly? Can you afford to pay 4 times a year? Generally, the fewer payments you make, the less you pay over all, due to paying less installment fees.

2. Shop your auto insurance for the best rates.

Please use my Web site, smartshopyourcarinsurance.com, to research insurance companies, choose coverage, learn shopping tips. and get price quotes.

When you get quotes, ask about payment plans, and have the agent or company tell you the total price based on how you will pay.

For example,  you get 2 auto insurance quotes. One is for $900 every 6 months, the other is for $930 every 6 months. You need to pay monthly. The company quoting you $900 has a $15 monthly installment fee, and the company quoting you $930 has a $5 monthly installment fee.

If each company allows you to make a one month down payment, the company quoting you $900 will actually cost you $990 every 6 months, and the company quoting you $930 will cost you $960, when you pay monthly, making it the better deal.

3. Add up the down payment, with the number & amount of installments for the payment plan fitting your budget, to determine the true cost of the insurance.

Some insurance companies will allow you to pay one month down, and then bill you monthly. Some insurance companies require 2 months down, then have you pay 4 or 5 installments. Other auto insurance companies have different payment plan requirements. The specifics of  how much you will need to pay to start your policy, and when & how much you will be billed, will depend on each insurance company.

If you are with an auto insurance company where you made a $200 down payment, and then paid five $80 installments, your total cost was $600.

If you get an auto insurance quote from a company asking for $90 down & $90 a month, your total cost with this company would be $540, which is $60 less than the company you have now.
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Don’t think you are paying less with your current company because your last bill was $80, and the new company wants $90 a month. You were only paying $80 because you had to make a large down payment.

4. Choose an auto insurance company with a flexible payment plan.

If you can’t pay in full, a good option to choose is an auto insurance company offering a flexible payment plan. These plans require a minimum (usually one month’s premium) payment, but you can pay more to skip bills, and their installment charges.

Here is an example of how these flexible pay plans usually work:

You receive your monthly bill, but you have some extra cash, so you decide to pay for two months with this bill. You will not have to pay anything the following month (you may get a bill stating “0” due) and you will not have to pay an installment charge. Flexible pay plans are a great way to avoid paying installment charges.

Continuing with this example, say there is a $5 installment charge. You get your monthly bill, pay for 2 months, and you pay one $5 installment charge. The next month, you get your “0” due bill, and you decide to pay another 2 months. You pay no installment charges for these 2 months since nothing was due. The next month, you get another “0” due bill, and you pay the last 2 months, with no installment charges. Over your 6 month policy period, you had to pay only one installment charge, and you paid for your 6 month of car insurance over the first 3 months.

You could have chose to pay for 2 months, every other month, and have paid only 3 installment charges. This is why these are called “flexible” payment plans.

Availability of these plans, and the possibility to avoid fees, will depend on the specific insurance company, so always ask your agent or insurance company about how their payment plans work.

Car insurance companies with large installment fees may be best avoided, even if they have flexible payment plans, unless they have a good price for you — including the installment fees.

Another great way to save if you have to pay your auto insurance monthly, is enrolling in your auto insurance company’s automatic deduction plan. These plans can be tricky, so I will discuss the advantages & disadvantages of them in my next blog post.

Many insurance companies charge a lot more than other companies for the same coverage, but no company has low rates for everyone. You have to shop with all the leading companies, to find the company with the best coverage and best price for you.

What is the best payment plan for you? Leave me a comment on my facebook page. Follow me on Twitter for important insurance consumer news and new blog entries at CarInsWatch.