Here's Why I Always Pay My Insurance Premiums Annually Instead of Monthly

I have many different kinds of insurance. Like most people, I have automobile insurance for my car. I also have homeowners insurance to protect my property.

Whenever I sign up for an insurance policy, I make sure to set it up so I can pay my premiums annually. This is one of many choices available to me, as I could also opt to pay monthly or to pay on some other set schedule such as quarterly or twice a year.

There are two very simple reasons why I opt to cover my insurance costs with one annual payment instead of making several smaller payments throughout the year. Here's what they are.

To earn a discount on premiums

The single biggest reason why I always make sure to pay insurance premiums annually is because doing so saves me money. Many insurers provide around a 5% to 10% discount to policyholders who make a single lump sum payment or who pay just twice a year instead of breaking up the premium into many smaller payments.

I have different insurance companies for different things, so the exact amount I personally save differs between companies. But overall, I end up paying about 7% less for all of my coverages than I would if I broke up the payment and sent it in monthly instead.

Saving 5% to 10% can make a real difference in how big of a burden insurance costs are. For a policy with a $1,000 annual premium, for example, getting 10% off the price just for paying once per year would result in an extra $100 in savings. That's a good chunk of change that most people can find many more fun things to do with than sending it to an insurer.

To simplify my life

Another reason I prefer to pay my insurance premiums annually is that it makes my life a lot simpler.

I don't have to sign into my online account and arrange to make payments each month or several times a year (or even sign in to check that autopay worked properly). Instead, I just transfer a little money from my checking account to my savings account each month automatically. That money collects in my savings account and is ready to go to pay the premiums when they are due. I simply transfer the funds over when the bill comes.

Of course, this only works for those who have the money to pay their premiums in one lump sum. I'm lucky enough to be able to do that because I shopped around carefully for affordable coverage. Since my premiums are affordable, it's not hard to set aside money in a savings account each month.

Anyone who is able to save the money for auto insurance in a savings account of their own may also want to consider paying these premiums monthly as well. This will mean they can also get a discount and avoid having to think about their insurance costs too often.