How Much Can You Save with a Paid in Full Discount?
Ah, yes. The beloved “paid in full” discount. While some love this discount, other drivers take a hard pass.
This discount is precisely what the name suggests. Your insurer gives you a discount on your car insurance premium because you’ve paid your yearly payment in one or two large payments. You can either choose to make a six-month or annual payment to qualify for a discount between 5%-10%.
While some insurance companies may not offer you a discount upfront, they might charge you extra to finance your insurance through monthly payments. You can avoid paying this interest by paying your annual premium in full.
To get a better picture of what this looks like, let’s consider a driver by the name of Shanice.
Shanice’s monthly rate is $75 after discounts, so at the end of the year, she’ll have paid a total of $900.
However, her insurer offers a 10% discount for drivers who pay in full at the beginning of the year. If she decides to go this route, she’ll make a one-time payment of $810 at the beginning of the year, saving her $90!
That’s $90 that can go toward paying off debt, putting gas in your car, buying groceries, increasing how much you have in your emergency savings, or enjoying a fun activity.
Paying in full allows you to keep more of your money right where it belongs – in your bank account. It also frees you from being tied down with monthly payments. This freedom means you can spend less time paying bills and more time doing what matters to you.
Pros and Cons of Different Payment Frequencies
The three most common payment frequencies we see with insurers are (1) paid in full, (2) monthly installment payments, and (3) pay as you drive. So let’s dive into these payment frequencies and discuss some pros and cons of each.
Paid in Full
You pay your six-month or yearly premium upfront in a single payment.
- Reduced Insurance Premiums: You can save up to 10% on your yearly insurance premium or avoid paying extra to finance your monthly payments.
- Payment Freedom: You only have to think about paying for insurance once or twice a year and have one less monthly payment to make.
- Steep Upfront Payment: Many drivers may not be able to afford to pay the yearly premium upfront.
- Ties up Your Funds: Setting aside such a large amount of money ties up your money that you could use for other purposes.
Divide your yearly premium into smaller, monthly installments.
- Easier on Your Budget: Paying for your insurance premium in installments is often easier on your budget. Less money leaves your bank account at a time, meaning that you’re less likely to be in a tight financial spot paying for car insurance.
- Convenience: Many insurances allow you to automate your monthly payments. If you’re someone who tends to forget when bills are due, this may be the perfect option for you.
- Overall Higher Cost: Although the monthly payments are smaller, you end up paying more than a driver who pays in full. Some insurers offer discounts of 10-15% for drivers who pay their premium annually.
- Cumbersome Monthly Payment: On the flip side, you might dread having another monthly payment tacked onto your rent, electricity, car note, and water bill each month. With a monthly payment plan, you lose the freedom that comes along with paying for your premium in full.
Pay As You Drive
Your monthly premium for a pay as you drive plan consists of the miles you drive on top of a base fee decided by your insurer.
- Only held accountable for the miles you drive: Since you only make payments on the miles driven, you have some say in how much your monthly premium will be.
- Difficult for budgeting: A monthly premium that’s constantly fluctuating can be complicated to include in your budget.
Is Paying in Full the Right Option for Me?
Only you can decide if paying in full is the right option for you. Although you stand to save money paying in full, you need to consider your financial circumstances.
If paying for your car insurance deductible in full puts you in financial turmoil, it might be best to opt for monthly payments for the time being. After all, you can always put aside money throughout the year and choose to pay in full the following year.
Which Insurance Providers Offer a Paid in Full Discount?
Many insurance providers offer a paid-in-full discount. Here’s a small list to give you an idea of your options:
Other Potential Discounts
Check with your insurance company to see if you qualify for any of the following discounts to save more on your car insurance:
- Good Student Discount: If you or your child is a full-time student with a GPA over 3.0, you may be eligible for the Good Student discount. To qualify, you’ll need to have a grade average of a B or higher and be between the ages of 16-25.
- Homeowner/Car Insurance Discount: Own a home and a vehicle? Consider bundling your policies together to save up to 25% on both home and car insurance.
- Multi-Car Discount: A multi-car discount for families with multiple drivers can help you save money on your deductible. You’ll need to insure two or more cars on the same policy to get this discount. Many car insurance companies offer discounts anywhere from 25%-30% for a multi-car policy.
- Anti-Theft Discount: Does your car have any anti-theft features like VIN etching or GPS-based systems? If so, you might qualify for a discount of up to 5%-25%.
- Military Discount: Insurers often give discounts to military members and veterans. Check with your insurer to see how much of a military discount they offer.
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