Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Most auto insurance consumers pay their auto insurance premiums in monthly installments instead of paying in full
  • If you pay your bill monthly, you will pay for 30 days of coverage at a time prior to when the coverage is afforded
  • Even though you only pay a portion of the total premium, your insurance term will stay remain the same
  • If your term isn’t set to expire for months, you have the option to cancel the policy regardless of how you’re paying
  • If you cancel and you’ve just paid your payment, you could be entitled to a refund of unearned premiums

The average consumer pays $841 every year for auto insurance.

Assuming that you pay right around this amount and you’ll own a car for close to 50 years of your life, you’ll pay around $42,000 in your lifetime just to purchase standard coverage that you don’t necessarily want to use.

Since the costs are only climbing, one way to keep the expense manageable is to pay your car insurance premiums in installments.

Paying monthly offers the average consumer living off of an average income a reasonable alternative to paying for six months or even a year’s worth of premiums all at once.

If you’re trying to decide which installment option is best for you, you might be interested in knowing whether or not there are restrictions that come along with choosing not to pay upfront, especially if you want to cancel early.

Compare car insurance quotes right here by entering your zip code above. It’s free and could save you hundreds.

Paying Monthly is the Most Common Installment Option

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You can either pay your auto insurance premiums in full, which covers your total premium for the entire policy period, or you can pay installments.

There’s a variety of different installment options that consumers can choose from. Most insurers will let you pay monthly, quarterly, and semi-annually.

Out of all of the installment options offered by the most reputable insurers, monthly installments are the most popular.

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How is a monthly installment calculated?

If you decide that the monthly installment fits best in your budget, you’ll generally be paying for about 30 days of your coverage each time you get a bill.

As long as you didn’t make a down payment and you don’t skip your last month, the total premium will be divided by the duration of the term (in months) and then you’ll have equal installments.

Some carriers have unique monthly installment plans where you’re required to pay a larger initial payment. If you have to pay two months down, the balance of the total premium will be divided by either five or 11 months (depending on the policy period).

If you sign up for a five-pay plan, you’ll pay five equal installments throughout your term and skip a payment the month before your term renews.

Do you pay in advance or in arrears?


There are two different billing methods that are used when a contract holder is invoiced. You could either be billed to pay for services in arrears or you could be billed to pay for the services in advance.

Here are some services you pay for in arrears:

  • electricity
  • water
  • trash
  • other utilities

This means that you pay after the period that the service was provided. That’s mainly because the amount that you have to pay is dependent on usage.

When you’re paying an insurance installment bill, you’ll make the payment in advance.

In translation, you must pay for the coverage that’s on your policy in advance before you’ll receive the coverage. Since you may not need to use the coverage, it’s very important that the policyholder pays for benefits before they need the coverage instead of after.

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Will your premiums change each time you’re billed?

One of the great things about auto insurance is that policies are contracts that have provisions built in that protect the consumer.

There’s even an entire Consumer Bill of Rights dedicated to spelling out exactly what every consumer’s rights are when they are buying insurance. Insurance companies can’t violate these rights or they can be shut down.

You might think that you’ll have to worry about rate increases when you’re paying monthly instead of paying in full, but that’s not something that you need to worry about.

Your policy is sold in terms that last for six months or for one year at a time. During that time, the term premium will remain fixed. Your rating information won’t change unless you voluntarily make changes to your policy during the term.

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Can you switch carriers if you’re paying too much?


If you had an old ticket or accident and you’re still paying for it on your existing insurance, one way to get a lower rate is to shop around.

As long as the accident date or conviction date is more than three years ago, it won’t have an impact on your rates any longer. If you switch, you can go from paying a policy with a surcharge to paying a policy without one.

If you’re interested in shopping around for lower rates through competitors, you’re free to do so.

There’s no obligation for you to stay with your current insurer for the entire term that’s listed on your policy contract.

You are free to cancel your policy if you find a policy you’d like to replace your existing insurance with.

Can you cancel your insurance for other reasons?

If you’re going to sell your car or you’re planning a move, you can still cancel your auto insurance no matter how you’re making your payments. It doesn’t matter how you’re paying:

  • in full
  • monthly
  • quarterly
  • semi-annually

It also doesn’t matter why you want to cancel your insurance. As long as you’re a policy owner, you have the legal right to cancel the policy at any time.

Valid Reasons to Cancel Your Insurance Early


There are plenty of reasons that you can cancel your insurance before the term is up. If you plan out the cancellation and you time it right, you don’t have to worry about being fined.

If you cancel your insurance too soon, you could get stuck paying the price in fines. Here are some valid reasons to cancel your insurance:

  • You have purchased an insurance policy from another carrier to cut down on your expenses
  • You have moved to another state and purchased insurance through another carrier
  • You have sold your vehicle and don’t have any other vehicles
  • You have gifted your vehicle to someone and signed a release of liability
  • You have licensed your vehicle as non-operational and don’t need comprehensive insurance

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Invalid Reasons to Cancel Your Insurance

  • You’re parking your car for extended periods but still have valid tags
  • You can’t afford your insurance and don’t have coverage anywhere else
  • Your lender has force-placed insurance on your vehicle for failing to maintain full coverage insurance
  • You have surrendered your license but you still have a vehicle registered in your name

How do you cancel your existing insurance?


If you have a valid reason to cancel your insurance, you need to make the request to terminate the contract in writing. The request needs to include your policy number, name, address, contact number, and the date you want the coverage to be terminated.

If you want to secure coverage again in the near future, you should keep the policy active to maintain all of your discounts.

Drivers who haven’t had cars in years will need to get several quotes to choose the most cost-effective policy. Use our online rate comparison tool and see which carrier will beat out the competition.