How To Budget For Insurance Premiums
Posted in Auto Insurance
February 3rd, 2011
Most insurance companies bill their customers every six months when the new insurance rates reset. But, for many Americans and especially young people just starting their independent financial lives, a large auto or life insurance premium can be a daunting expenditure to tackle every six months if you do not prepare for it ahead of time. Here are a few budgeting tips that you can use to ensure that your insurance bill does not hit you hard when you are least prepared for it.
Pay a Little Bit of Your Premium Every Month
While it is your right as the customer to pay your insurance bill when it is technically due every six months, paying such a large bill infrequently can have serious consequences on your monthly budget if you are not prepared for it.
Many insurers allow you to pay your insurance premium every month breaking up the larger payment into six easy smaller payments that you can accurately budget for each month with your written household budget. You simply have to ask to join the program if your insurer offers it, and your insurance company might even offer a discount for participating in the program.
Set Money Aside Every Month for Your Premium
If you are adamant about not paying your insurance bill every month and waiting until it is due in six months, you can set up a separate savings account in preparation for the bill when it comes due that is dedicated to paying for your insurance. You can then deposit one sixth of your insurance premium in the savings account every month until it is time to pay.
You may even be able to earn small amount of interest during the time your money sits in the account before it is paid to the insurance company. Consumers run the risk of using that savings for another purpose or as an emergency fund with this type of savings plan which could eventually leave you short of funds when your insurance bill is due resulting in a possible lapse of coverage.
Sign Up For Automatic Payment Of Your Premium
One of the best features that you can sign up for is your insurance company’s automatic payment plan. Most insurance companies have an automatic bill paying service that drafts the payment out of a linked bank account. The automatic payments also work well in conjunction with the feature of splitting your bill into six equal payments. Automatic insurance payments can ensure that you never miss a due date for your insurance premium and possibly letting your coverage lapse or expire.
Budgeting for your insurance premiums is not an easy task especially when they are technically due every six months. But, with a little prior planning, you can ensure that you never miss a premium payment and never bust your budget. Paying a set portion your insurance bill every month and making it an automatic withdraw from your banking account are the best ways to ensure that you are successful in managing your money and budgeting for your insurance premiums.
Hank Coleman is the founder of the personal finance blog Money Q & A and several other financial websites. He is a freelance writer, entrepreneur, and professional in the government sector. Hank holds a Bachelor’s Degree in Business Administration, a Master’s Degree in Finance and is currently studying for his Certified Financial Planner (CFP) credentials. Be sure to follow him on Twitter.