Monthly Car Insurance Plans
Last Updated on November 13, 2022
Monthly car insurance plans combine flexibility with affordability. You can protect your vehicle without a 6-month or 12-month commitment.
Most car insurance companies offer month-to-month car insurance plans. You can cancel these plans at any time – even in the middle of the month. You can also avoid paying hefty fees upfront.
Keep reading to discover everything you need to know about monthly car insurance plans, the advantage of monthly car insurance plans, and how much you can expect to pay for month-to-month car insurance.
- How Monthly Car Insurance Plans Work
- Paying Monthly Versus Annually or Semi-Annually
- Pros and Cons of Monthly Car Insurance
- How Much Does Monthly Car Insurance Cost?
- Factors that Impact the Price of Monthly Car Insurance
- Best Companies for Monthly Car Insurance
- Most Insurers Have Flexible Cancellation Policies
- Final Word on Monthly Car Insurance
How Monthly Car Insurance Plans Work
Effectively, all major car insurance companies in the United States offer monthly car insurance plans.
Your car insurance company may renew your car insurance policy every 6 to 12 months, but you are free to cancel your policy at any time (with most providers). That means you are effectively buying a monthly car insurance policy from your provider.
As long as your insurer has a flexible cancellation policy with no cancellation fees, you may already be enjoying monthly car insurance.
Here’s how monthly car insurance plans work with major insurance providers in the United States:
- Buy car insurance as you normally would, signing up for car insurance through GEICO, State Farm, USAA, Progressive, or any other major provider
- Choose month-to-month payments instead of upfront full payments; instead of paying for 6 or 12 months of car insurance upfront, you’re paying a premium each month
- Cancel car insurance at any time; most providers let you cancel in the middle of any 6-month or 12-month insurance period; many providers even let you cancel within a month, and you’ll receive a refund on premiums you have already paid
Most drivers in the United States use a month-to-month payment system for car insurance. Instead of paying, say, $600 every six months or $1,200 every year, most drivers pay premiums of $100 per month.
Paying Monthly Versus Annually or Semi-Annually
You need to make several major decisions when buying car insurance, including decisions about coverage and policy terms.
First, you need to decide if you’re paying monthly, annually, or semi-annually.
Most drivers in the United States pay for their car insurance monthly. Your provider may charge a deposit, then separate your premium into monthly payments. Instead of paying a lump sum every 6 or 12 months, you pay a fixed premium each month. This is effectively like month-to-month car insurance.
However, some drivers save money by paying for their car insurance policy in full upfront. Instead of paying for car insurance every month, for example, they pay a lump sum every 6 or 12 months. Most insurers provide a discount of around 2% to 5% for paying in full upfront.
Here are the different car insurance payment methods and how they work:
Monthly: Most drivers in the United States pay monthly premiums to their insurance company. The insurance company breaks your 6-month policy into six equal payments (or your 12-month policy into 12 equal payments), and you pay the premium each month to maintain coverage.
Annually: Some drivers choose to pay for car insurance in a lump sum every 12 months. Instead of breaking their premium into 12 equal payments, they pay for all 12 months at once.
Semi-Annually: Most insurers in the United States use 6-month renewal periods. Some drivers pay for their entire 6-month policy upfront instead of paying month-to-month.
Pros and Cons of Monthly Car Insurance
Most drivers pay for car insurance monthly. It’s a popular and advantageous way to manage car insurance without the high upfront cost of paying for a 6-month or 12-month policy at once.
Here are some of the pros and cons of monthly car insurance:
Pros
Some of the advantages of monthly car insurance include:
Manageable Payments: The biggest advantage of monthly car insurance is the ability to make manageable payments. Instead of paying a lump sum of $1,200 for a year of car insurance, you can pay $100 per month. Some people cannot afford a large annual or semi-annual lump sum, while others prefer making monthly payments over larger lump sum payments.
Flexibility: Most insurers have flexible cancellation policies for monthly, 6-month, and 12-month policies. You can cancel your policy at any time and receive a full refund. However, monthly car insurance policies could provide greater flexibility because you aren’t waiting for a large refund from your insurer. Because you pay monthly, you can cancel at the end of the month and avoid waiting for a refund.
Avoid Waiting 6 to 12 Months for Renewal: Most insurers have flexible cancellation policies, but not all insurers do. Some insurers require you to wait for your 6-month or 12-month policy to expire before you cancel your auto insurance. In this situation, a month-to-month policy could give you greater flexibility.
Avoid Cancellation Fees: Most major insurers in the United States do not charge cancellation fees. However, some insurers do charge cancellation fees – like 10% of the remaining premiums. If you’re on a month-to-month policy, then your cancellation fee could be much smaller than someone on an annual or semi-annual policy.
Easily Switch Providers: Overall, there’s less hassle when switching providers with a month-to-month car insurance policy. It’s easy to try one provider, switch to a new one, and experiment with different insurers to find the perfect match.
Cons
Month-to-month car insurance is the right choice for some drivers – but not all drivers. Some of the downsides of monthly car insurance include:
2% to 5% Higher Premiums: Most insurers offer a small discount when paying for your policy in full upfront. This discount is typically around 2% to 3%, although some providers lower rates by as much as 5%. Sometimes, this discount is based on the cost of borrowing: you’re effectively financing your auto insurance premiums over a 6-month or 12-month period by making monthly payments instead. Check your insurer’s paid-in-full discount to see how much more you pay with monthly car insurance.
Missed Perks: Some insurers take away perks with month-to-month car insurance. You may not qualify for free roadside assistance, rental reimbursement coverage, or accident forgiveness, for example, compared to a policyholder with 6-month or 12-month policies.
Potential for Missed Payments: If you’re forgetful, you may forget to pay your monthly car insurance premium. Most insurers have a grace period of 7 to 21 days before letting your car insurance lapse. However, frequent lapses could lead to issues – like cancellation of your policy.
Overall, there are few major disadvantages to monthly car insurance aside from the 2% to 3% higher premiums.
How Much Does Monthly Car Insurance Cost?
The average driver in the United States pays $1,450 per year for full coverage car insurance, or around $121 per month.
If you’re buying liability-only coverage, you can expect to pay around $900 per year or around $75 per month.
Here’s how much the average policy costs by state:
| State | Annual Rate for Full Coverage | Average Monthly Premiums for Full Coverage |
|---|---|---|
| Alaska | $1,359 | $113 |
| Alabama | $1,542 | $129 |
| Arkansas | $1,597 | $133 |
| Arizona | $1,617 | $135 |
| California | $2,115 | $176 |
| Colorado | $1,940 | $162 |
| Connecticut | $1,750 | $146 |
| Washington D.C. | $1,858 | $155 |
| Delaware | $2,137 | $178 |
| Florida | $2,560 | $213 |
| Georgia | $1,647 | $137 |
| Hawaii | $1,306 | $109 |
| Iowa | $1,321 | $110 |
| Idaho | $1,121 | $93 |
| Illinois | $1,578 | $131 |
| Indiana | $1,256 | $105 |
| Kansas | $1,594 | $133 |
| Kentucky | $2,105 | $175 |
| Louisiana | $2,546 | $212 |
| Massachusetts | $1,538 | $128 |
| Maryland | $1,640 | $137 |
| Maine | $1,116 | $93 |
| Michigan | $2,133 | $178 |
| Minnesota | $1,493 | $124 |
| Missouri | $2,104 | $175 |
| Mississippi | $1,606 | $134 |
| Montana | $1,692 | $141 |
| North Carolina | $1,368 | $114 |
| North Dakota | $1,419 | $118 |
| Nebraska | $2,018 | $168 |
| New Hampshire | $1,307 | $109 |
| New Jersey | $1,901 | $158 |
| New Mexico | $1,505 | $125 |
| Nevada | $2,023 | $169 |
| New York | $2,020 | $168 |
| Ohio | $1,023 | $85 |
| Oklahoma | $1,797 | $150 |
| Oregon | $1,244 | $104 |
| Pennsylvania | $1,445 | $120 |
| Rhode Island | $1,845 | $154 |
| South Carolina | $1,894 | $158 |
| South Dakota | $1,581 | $132 |
| Tennessee | $1,373 | $114 |
| Texas | $1,875 | $156 |
| Utah | $1,469 | $122 |
| Virginia | $1,321 | $110 |
| Vermont | $1,158 | $97 |
| Washington | $1,371 | $114 |
| Wisconsin | $1,499 | $125 |
| West Virginia | $1,610 | $134 |
| Wyoming | $1,736 | $145 |
| Source | Insure.com |
Factors that Impact the Price of Monthly Car Insurance
The price of month-to-month car insurance varies between states, drivers, vehicles, and locations.
Some drivers in the United States pay as little as $40 per month for car insurance. Others pay $400 per month.
Here are some of the factors impacting the price of month-to-month car insurance:
Driving History: Driving history has the biggest impact on your monthly car insurance price. Safe drivers with 5+ years of incident-free driving history will pay much less for car insurance than drivers with multiple at-fault accidents or citations on their record.
State Insurance Laws: Drivers in Michigan and Florida pay over $2,500 per year for full coverage car insurance, on average (around $208 per month). Meanwhile, drivers in Maine and Idaho pay less than $1,000 per year (around $83 per month) for the same coverage. There are significant differences between states when it comes to insurance laws, driving conditions, weather, crime rates, and more.
Discounts: Some insurers offer considerable discounts, making it easy to save hundreds per year on car insurance. Some drivers qualify for these discounts, while others miss out. Popular monthly car insurance discounts include bundling discounts, multi-vehicle discounts, good student discounts, and low mileage discounts.
Your ZIP Code: Insurers check your ZIP code to provide customized rates. Some ZIP codes have higher crime rates and accident rates than others. Other ZIP codes are in areas at risk of weather-related damage – like low-lying areas subject to hurricanes. Your ZIP code could significantly change the price of monthly car insurance.
Your Insurance Company: USAA, State Farm, and GEICO tend to be the cheapest insurers in the United States. However, different companies charge different rates across the country. Some insurers specialize in insuring young drivers and charge relatively cheap rates, while others specialize in insuring older, more experienced drivers.
Coverage Options: Some drivers have minimum liability coverage on their monthly car insurance policy, allowing them to legally drive on the road at the lowest possible cost. Others have full coverage car insurance for maximum protection. Your monthly car insurance premium could be anywhere from $50 to $200 per month based on coverage alone.
Vehicle Type, Age, and Value: Your insurance covers the value of your vehicle. If you have a $50,000 vehicle, you’ll pay more for full coverage car insurance than someone with a $5,000 vehicle.
Best Companies for Monthly Car Insurance
The best companies for monthly car insurance are similar to the best companies for overall car insurance. These companies include:
Most Insurers Have Flexible Cancellation Policies
Most major insurers effectively offer monthly car insurance by maintaining flexible cancellation policies.
With most car insurance, you can:
- Cancel at any time without penalty
- Receive a refund on any premiums you have previously paid
- Switch to a new insurer as soon as today
You might be on a 6-month or 12-month insurance policy. However, you’re free to cancel your policy at any time and switch to a new provider.
Check your insurance policy’s cancellation policy to determine how easy it is to switch. You may already be effectively paying for monthly car insurance without knowing it.
Final Word on Monthly Car Insurance
Monthly car insurance is the norm in the United States. Most insurers offer month-to-month car insurance policies that are easy to cancel at any point. Although you may technically have a policy term of 6 to 12 months, you pay premiums monthly.
Many drivers prefer monthly car insurance over annual or semi-annual plans. You can pay lower rates and avoid making a large lump sum every 6 or 12 months. Plus, most insurers only provide a small discount (2% to 3%) for paying in full upfront.
To learn more about your monthly car insurance options, compare quotes from major providers in your area today.
