CarInsurance.com Insights
- An installment payment service fee is a small charge insurers add to each monthly payment when you don’t pay your policy in full — it covers the administrative cost of more frequent payment processing, not additional coverage.
- Most insurers charge $3 to $5 per installment payment — but that adds up to $36 to $60 a year, which is real money on top of an already rising premium.
- Setting up automatic bank withdrawals (EFT) is the easiest way to reduce the fee — many insurers drop the per-payment charge to $1 or waive it entirely for autopay enrollees.
- Paying your full annual or six-month premium upfront eliminates the fee completely — and some insurers offer a paid-in-full discount on top of the savings, making it the lowest-cost option for drivers who can manage it.
- If monthly payments are a better fit for your budget, that’s a valid choice — just ask your insurer about automatic payment discounts and any other discounts you qualify for before locking in a payment plan.
A service charge has been added to your monthly auto insurance bill, and you’re wondering what it is. We’ve got you covered.
Some insurance companies charge a monthly payment fee if you do not pay in full for the policy.
An installment payment service fee usually covers the monthly payment processing. To avoid paying this monthly service fee, you can pay in full when you buy your auto insurance policy. Here’s what you need to know about an installment fee charge.
Why do insurance companies charge installment fees?
Insurance agencies use premium installment charges to cover the administrative costs of more frequent payment processing. Most insurers offer one-year, six-month or one-month payment options for car insurance policies.
It is to the insurer’s best advantage if you pay your entire annual premium at once. This means less payment processing but also more cash flow for them. Essentially, by paying in advance, you’re loaning money to the insurer for up to a year.
If you choose a monthly payment option, the insurer does not get the total amount up front and has to devote more time and effort to the more frequent payment processing.
How much will you pay in installment fees?
The answer to this question depends on how you are paying. If you call or pay monthly, you will pay an installment fee of about $3-$5.
Like GEICO, many insurers charge a much lower installment fee (one dollar instead of five dollars) if your payments are set to withdraw directly from your bank account, also called electronic funds transfer (EFT).
The bottom line on the installment fee charge
Should you pay in advance annually or choose a monthly payment option? Which is best for you depends on your financial situation.
Paying in installments each month helps some people budget more effectively. Others who are comfortable with the annual payment in full reap the benefit of saving or repurposing the money they save on installment fees.
Check with your insurance agent to determine its fee if you make monthly installment payments. Don’t forget to ask about automatic payment discounts and other discounts you may qualify for. Use this information to decide what payment plan is best for you.
If you are struggling to afford your insurance, check out our expert tips on how to get the cheapest car insurance without sacrificing coverage.
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