Your car insurance is going to change soon, and we are not referring to the worrying increase in the annual premium that we have talked about in previous occasions. The insurance industry is warning of an imminent change among monthly payers, which may include you, and which has not been well received. We tell you what has happened and how it will affect you (because in this case it certainly will).
Car insurance costs have increased: what has happened this last months
Car insurance is one of those necessary evils that we pay for but hope to never use. Yet premiums keep going up year after year, causing many policyholders to wince when renewal notices arrive. According to the Association of British Insurers, the average car insurance premium in the U.S. rose 6% in 2023 to $462.
That’s the highest it’s been in four years. With costs steadily rising, drivers are looking for ways to reduce their car insurance expenses. Some insurers now offer monthly payment plans that seem appealing. But recent changes by major providers are impacting policyholders who choose monthly payments.
Are you monthly payers? Attention to what will change in your car insurance
In recent years, some car insurance companies have undergone some significant transformations on their monthly costs basis. One of the key reforms, presented by the new rules, is to increase the initial payments preliminarily. The minimum term of a policy is also expected to get longer.
Before, the first monthly price might be paid in a customer’s upfront payment and then he made only low payments monthly, but now many insurers require customer to pay first and last month’s price. The call for a portion between 25 and 50 percent upfront fee stays one of the prerequisites for some insurance companies.
Similarly, insurance businesses are increasingly offering extended minimum terms of coverage for monthly billing customers. Long periods of subscription time, i.e., 6 months or even 12 months, have become almost mandatory prior to gaining ability to either cancel or amend policy.
These changes mean that whereas one would previously make a payment plan on a monthly basis and not having to worry about higher upfront costs because they were stretched out over a longer contractual period, current customers who choose such plans will now have to pay higher upfront costs.
How will this change affect you? These are the consequences
The recent adjustment affecting the monthly car insurance policy will put forth new developments in various ways to clients. In essence, we can expect higher initial investment and more difficulties in changing plans. Such flexible solutions were enjoyed by consumers even until recently.
Therefore, insurers must give notice of at least 30 days ahead which indicates cancellation fees of those 30 days in advance. Effectively, this implies that customers can no longer just remount their plans and switch to another operator that, in their opinion, has a better rate.
Moreover, nowadays with many insurers insisting on no less than 20% down payment at the time of purchase. Initially, for 6-month policy of US$1000, one would pay US$200 more from the first month as installments compared to the first month’s installment.
In consequence, institutions face a dilemma that involves limited flexibility on the one hand and low initial outflow of funds on the other. People who would like to swap to other plans before the end of their current one can only do it by paying extra.
As you can see, car insurance for monthly payers is going to be a less popular option with this increase in premiums, something that financial advisors have been warning about for years. The key is that you will pay more for the same coverages, something you should be aware of when the next renewal occurs. Otherwise, we await confirmation on the quarterly and half-yearly payments.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.