Car Insurance Payment Discounts
One of the easiest ways to save money on your car insurance coverage is to pay for your auto insurance premiums upfront. By opting for a lump-sum payment as opposed to staggered, monthly charges, you could shave an average of 5% off your premiums.
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Furthermore, there are several other payment-based auto insurance discounts, all offering additional ways to save.
There are three main types of payment discounts offered to policyholders:
- Paperless/E-Billing: By going paperless, you’re choosing to receive all of your bills online. No paperwork will be sent to you, thus reducing damage and waste and allowing the insurance provider to give you a discount of as much as 5%.
- Paid-In-Full/Upfront Payment: Pay for your auto policy at the beginning of the term, clearing it all in one payment. This discount could save you anywhere from 5% to 10% depending on the provider.
- Auto-Pay: Create an automated payment plan to ensure the premiums are paid on time every month. Discounts differ but can generally save you around 3% to 5%.
There is no guarantee that your chosen insurance company will offer these discounts, so make sure you check first. Going paperless is always a good option, as is setting up an Auto-Payment, but clearing your premiums with a lump-sum isn’t advised if you’re not getting a discount in return.
In our research, we found that these discounts were offered across most states by nearly all of the biggest carriers (Allstate/Esurance, GEICO, State Farm, Liberty Mutual, Progressive, Nationwide) but were absent with some of the smaller, more localized companies.
How to Pay Car Insurance Premiums Upfront
If you’re a young driver, new driver, and/or have a bad driving record, you may struggle to pay for your premiums upfront. In those demographics and with that history, you’ll be considered high-risk, which means your insurance rates will be sky-high.
Paying $2,000+ in a single, lump-sum amount is something that most drivers in these demographics simply can’t afford to do. But there are solutions, ways that you can bring the cost of those premiums down and increase your chances of paying them off.
1. Think About the Car You Buy
The car that you buy can have a bigger impact on your insurance rates than the vast majority of car insurance discounts. After all, the car is the thing that’s being insured, the thing that will need to be fixed or replaced.
The more expensive your car is, the higher the cost of repairs will be, and the more crucial collision and comprehensive coverage will become. The older it is, the less likely it is to have essential safety features and anti-theft devices.
There is no ideal car where insurance is concerned, as each insurer has their own ratings and their own systems. Generally, however, the car should be at least a few years old, with basic safety features (seatbelts, airbags, anti-lock brakes) and anti-theft features (alarms, trackers).
You want something that you can afford now and something that won’t require expensive repairs in the future. The safety rating is also important.
Think about your car as a long-term investment and avoid focusing too much on getting a flashy car fitted with the latest high-tech features and the most extravagant bodywork.
A brand-new car isn’t much different from a car that is just a couple of years old, but because of the increased insurance costs and the rapid depreciation, it could cost you thousands of dollars more over the first couple of years.
2. Improve Your Credit Score
A higher credit score could save you hundreds of dollars on a car insurance quote, and the cheaper the quote is, the easier it is to pay upfront.
The first step to fixing your credit score is to get a free credit report from one (or all, if you can) of the three major credit bureaus.
Check for mistakes, errors, and fraud, and clear them from your account by going through the dispute process.
Next, you should look to improve your credit utilization ratio, which compares credit to debt. Your goal is to increase the former while decreasing the latter. Contact creditors, request larger credit limits, and, in the meantime, try to pay down as much of your debt as you can.
Finally, if your score is really struggling, look into credit builder loans, secured credit cards, and lending circles. You can also add yourself as an authorized user onto the card of a trusted user with a good credit history.
3. Look for Other Car Insurance Discounts
Payment discounts are just one of the ways you can reduce the cost of your insurance premiums. Depending on your state and insurer, you may also be offered the following:
- Good Student Discount: By maintaining a B average, you can get a discount with the majority of providers and in the majority of states. In fact, good grade discounts are encouraged by many state authorities. Other student discounts may also be available, including those aimed at full-time students who live on campus.
- Safe Driver Discount: Most insurers offer discounts for drivers who go several years without making a claim or getting a moving violation. Stay accident-free, claim-free, and ticket-free to secure a safe driving discount.
- Defensive Driving Course Discount: Show your skills on the track, pass the test, and you’ll be rewarded with a discount from most insurers. Completing a defensive driver training course proves that you have what it takes to avoid costly collisions, which means there’s less chance you will be involved in a serious and costly accident.
- Low Mileage Discount: The less time you spend on the road, the lower your car insurance rates will be. Many insurers offer low mileage programs, while others cater entirely for low mileage drivers.
- Multi-Policy Discount: Often referred to as “bundling”, a multi-policy discount encourages you to purchase two or more insurance products from the same provider. Some of the biggest bundling discounts are offered by large insurance carriers like GEICO and reserved for customers who purchase auto insurance and homeowners insurance/renters insurance.
- Multi-Vehicle Discount/Multi-Car Discount: Add two or more vehicles to your auto insurance policy and you could shave a few dollars off the total. Offered by nearly all insurers, this is a great way to save if you have several cars and drivers in your household. Some insurers will even offer this discount if your additional vehicles are RVs, motorcycles, and boats.
- Military Discount: If you are a member of the military, you should be offered a discount on your car insurance. In such cases, however, we recommend getting a quote from USAA, as they will nearly always offer the best rates for military members and their families.
- Customer Loyalty Discounts: Auto insurance companies will often take advantage of complacency, increasing your rates for each year that you renew. But many of them will also offer you discounts if you renew at least a week before your policy expires.
- Other Discounts: You may also be offered smaller discounts for using daytime running lights, agreeing to the installation of an app that tracks driving habits, and being part of certain membership clubs.
4. Sell Unwanted Items
Got any old clothes or electronics going spare? Is your old iPhone or Xbox just gathering dust? It has never been easier to sell unwanted items and to get good money for them.
Sites like eBay, Amazon, Craigslist, Facebook, and an endless succession of garage sale apps will connect you with interested buyers and facilitate a fast, seamless sale.
5. Use Your Savings
It’s always a risk to use your savings or emergency funds to pay for car insurance premiums, but it might be a risk worth taking because, in most cases, it makes perfect financial sense.
Imagine, for instance, that you have $2,000 sitting in a savings account and have been quoted a $2,000 policy with a potential discount of 5% if you pay upfront.
The best savings accounts in the United States pay 2% and the majority pay much less than that. Over the course of a year, that $2,000 will earn you $40 with a 2% APY, a measly sum, to say the least.
On the flip side, if you use that money to clear your premiums, you’ll save yourself $100. Over the year, that’s an extra $60 in your account, and you’ll also have one less bill to worry about every month.
The differences are slight, but every penny helps and if you’re looking for ways to maximize your money, this is a pretty good option.
6. Compare and Contrast
Don’t go with the first insurance company that offers you a good price; don’t base your decision on loyalty, family preferences or your favorite commercial.
Getting auto insurance quotes is as easy as making a call to an insurance agent or trying a few comparison websites. After providing some basic personal information, you’ll get quotes from a number of different car insurance companies and can choose the one best suited to your budget and your needs.
The differences between the most expensive and the cheapest provider could be huge. A policy that costs $1,500 with one carrier could be $3,000 or more with another. By opting for the former, that upfront payment will be much more manageable.
With so many coverage options and a seemingly endless number of discounts, car insurance can seem incredibly complicated and confusing. But ultimately, it all boils down to one simple principle: The more of a liability you are, the more money you will pay; the more you reduce this risk and increase the insurer’s bottom line, the more you will benefit.
In that sense, car insurance is a lot like life insurance. The underwriters look at the likelihood that they will pay out (which, in this case, means you will die during the term) and use this probability to adjust the benefits and the premiums. If you improve your health, reduce the coverage or increase the premiums, you’ll make life easier for them and will benefit as a result.
With car insurance, most of the discounts are connected to reduced liability and risk, but others, including payment discounts, are there to guarantee the insurer will get paid.
Make life easy for them and, generally, they will reward you.