Why Buy Monthly Auto Insurance?

You can spend a pretty penny on your car between gas, routine maintenance, repairs and insurance -- especially the insurance. All car owners are obligated to carry liability insurance, and you could be required to get comprehensive and collision coverage when you finance the ride. To make auto insurance more affordable, most companies let customers pay by the month. It's a good way to avoid one large payment, but it does have its drawbacks.

Affordability

Life is unpredictable. No matter how much you plan, an unforeseen emergency may arise leaving you short on cash. This is where a monthly payment plan can help since you don't have to part with a ton of money upfront. When the bad thing happens, you'll wish you had that money to help with immediate expenses. There is a catch to this. You can expect to pay slightly more for the total insurance when the policy is broken up into six or 12 payments. You may also incur additional monthly costs, such as payment processing fees.

Convenience

When you pay your insurance monthly, you can factor the payments into your budget. Paying by the month will force you to put the insurance into your budget, which in turn could force you to be more responsible. After all, if you miss a payment, you could lose your insurance, and any lapse will raise your rates. If you are worried about getting the payments in on time, most agents can arrange to have the monthly payment automatically drafted from your bank account.

Flexibility

Let's say you get into an accident and find out your insurance agent didn't come through as you hoped. You might feel better if you ditch him right away, but that won't be easy if you paid the entire premium upfront. When you make monthly payments, you have the freedom to switch companies within 30 days. You also don't have to worry about waiting weeks for the insurance company to reimburse you for the remainder of the policy.

Temporary Options

Some insurance companies offer temporary policies that last anywhere from a day to a month. These policies are ideal if you're selling a vehicle or expect to relocate soon. It can also be used to cover a friend, relative, or neighbor using your vehicle temporarily. Temporary insurance is more expensive than a regular policy because you are paying for the convenience of short-term coverage. Insurance companies make money off the customers that pay, but don't file claims. Temporary insurance customers don't stick around long enough to bring in a big profit, so they get hit with higher rates. Still, it may be worth it to you if you don't need to commit to any long-term policy.

About the Author

Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.