Insurance Company Payment Charges
We often get questions in regards to the payment charges that insurance companies place on installments so I wanted to take a moment to discuss the payment options and any associated fees. Granted, each insurance company addresses these charges differently but there are a few techniques that can make your insurance more cost-effective.
First, a little history, a few years back, insurance companies were looking for an additional avenue to reward their policyholders. They found that statistically, roughly 85% of all policyholders break their premiums into equal installments; either monthly, bi-monthly, quarterly or semi-annually. They decided that they would allow for a credit if a policy was paid up front and in full. Actually, most insurance companies now give a discount off the premiums if the payment option is anything BUT monthly! For example, simply changing the payment plan option from monthly to quarterly will trigger a small additional credit thus lowering your overall insurance cost let alone eliminating additional installment charges.
Additionally, the insurance industry needed a way to meet the expenses of adminstering the payment plans as well as the cost of mailing the invoices, etc. They included a $2 installment charge which has evolved into the most common $5 installment fee that most see nowadays.
It is important to remember that this charge is in no way a FINANCE CHARGE. This is simply a way of controling premiums by addressing the external costs of maintaining a payment plan.
So, if you break your Auto Insurance policy into twelve monthly installments, the additional cost to our policy would $60 of monthly installment charges PLUS the lack of a credit simply because of the monthly payment option.
For more information about lowering your insurance cost by adjusting the payment program, give us a call!
-Chris Bechtold 02-11-10
