Pay By The Month Car Insurance

Key Points

Benefits of Pay by the month Car Insurance:

  • Continuous Cover: Worried about forgetting to renew your car insurance? Monthly installments alleviate this concern by automatically renewing your cover, ensuring continuous protection. 

  • Flexibility: Should you decide to switch insurers during your policy term, pay by month car insurance makes transitioning to a new provider easier because you don’t have to wait for a hefty refund - you can just cancel next month’s payment.

  • More Payment Options: Insurers are becoming more flexible with payment timings, with some offering fortnightly payments to align with paydays. While paying annually is often more economical if monthly payments incur extra charges, many insurers allow pay by the month car insurance premiums without additional costs.

Important Note: It’s still important to review your cover regularly, and update your policy details promptly if your circumstances change, such as your address or bank information - or you pay off your car loan. That usually brings your premium down, lowering your monthly payments.

Opting to pay month by month car insurance monthly instead of annually can enhance your cash flow by dividing your annual premium into smaller, more manageable installments. This is particularly helpful if you’re on a fixed income or have limited financial resources. Spreading your premium payments across the year can also help you with budgeting and managing other essential expenses.

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Does it cost more to pay your car insurance by the month?

Some insurers do charge more for car insurance pay by month - so be aware of this and ask the question. Several of the major car insurers that don’t charge any extra to set up monthly direct debits though - so compare your providers with this in mind.

There are also insurers that offer discounts for upfront lump sum payments. A few minutes with a calculator can save you quite a bit. However, consider whether making a yearly payment fits within your financial situation.

Can you switch from annual to monthly payments at renewal?

Many insurers allow you to switch between annual and monthly payments at renewal with ease. However, some insurers may charge a fee for this change.

Annual vs. Monthly payments:

Annual payments can offer some benefits, such as eliminating the need to budget for ongoing payments, and potentially gaining a lower total premium compared to monthly payments. It’s worth asking your provider about discounts for annual payments, as this can influence your decision.

Compulsory Third Party (CTP) insurance:

CTP insurance  must generally be paid as an annual lump sum or a six-monthly payment and isn’t usually available for monthly payments.

Convenience vs. Cost:

Paying your car insurance by the month can be more convenient, but it might result in a higher total premium overall. It’s not just a matter of dividing the annual cost by 12.

Additional Charges:

The extra cost for monthly payments can vary based on: 

  • Insurer

  • Age

  • Location

  • Car model. 

Usually, paying premiums on a monthly basis incurs an additional cost of 6%-8%^, compared to annual payments. Even with semi-annual payments, there's typically a 3%-4% loading on your premium over annual payments.^ Despite this, reports indicate around 95% prefer to pay their premiums monthly - especially as those premiums keep rising - so if you prefer to pay in smaller, more manageable amounts, you’re in popular company.^

Does pay by the month car insurance cost more?

It can do for some insurers. Be aware of any extra fees for monthly payments, such as regular admin fees or higher base premiums. Always read your policy’s Product Disclosure Statement (PDS) to understand any additional costs. A brief list of insurers that don’t charge extra for monthly payments:

  • Rollin Insurance 

  • Bankwest Comprehensive

  • Commonwealth Bank Comprehensive

  • Bank of Melbourne Comprehensive

  • BankSA Comprehensive

  • NAB Comprehensive

  • National Seniors Comprehensive

  • St.George Bank Comprehensive

  • Westpac Comprehensive

  • People's Choice Comprehensive

Which insurer is the cheapest pay by the month car insurance?

Pay as you drive insurance cover can work out cheaper because your premium is based on your driving distance. That said, your premium quotes will be based on your specific circumstances, so there’s a wide variation between quotes.

Choosing the right payment option for your car insurance can help you manage your finances better while ensuring you have the necessary coverage.

Sources:

https://www.apia.com.au/apia-good-life/finance-career/monthly-vs-annual-car-insurance-payment.html#:~:text=Benefits%20of%20paying%20your%20insurance%20by%20the%20month&text=Choosing%20monthly%20payments%20may%20allow,or%20have%20limited%20financial%20resources.

https://insurance.everyday.com.au/car-insurance/drive-less-pay-less.html

^https://www.thinkindependent.com.au/tricks-traps-insurance-premium-payments/#:~:text=Typically%20you%20pay%206%25%2D,4%25%20more%20than%20annual%20payments.