What Is a Paid-In-Full Discount?
- Why Offer a Pay in Full Discount for Insurance?
- What Types of Insurance offer Pay-In-Full Discounts?
- States Where Paid-In-Full Discounts Are Not Allowed
“Do you want to set up withdrawals for monthly instalments, or would you like to pay in full?”
If you’re setting up an insurance policy at an agent’s office, this question is bound to be asked. And although it might be phrased differently, the same question gets asked when you’re buying your insurance online.
You have the option to set up monthly payments, normally to be debited directly from your bank account, or you can pay in full. Many insurance providers offer a paid-in-full discount for of their products. What is this discount all about, and how is it helpful? Here’s what you should know.
Why Offer a Pay in Full Discount for Insurance?
Some financial advice passed along on the regular is to hold onto your money as long as possible. Paid-in-full discounts fly in the face of that advice, but it can make sense. Insurance providers may offer a small discount on insurance premiums if you pay for your annual policy in full rather than making monthly or quarterly payments, and it’s actually in your favor.
Lower Insurance Premiums
With insurance, you’re paying for a service that you hopefully never have to use. If you can pay less, that seems like a good plan, doesn’t it? When you pay in full for your policy, many insurers like Allstate offer discounts that can save you as much as 10% or even 20% on your insurance.
Other insurance companies may not offer a paid-in-full discount. However, they may charge you extra to finance your insurance, as is the case with Geico’s instalment charges, so you still save money by paying for your year’s premiums in full. Overall, you’re likely to keep some extra cash in your pocket if you pay in full.
Less Chance of an NSF Payment or Lapse in Coverage
You know the feeling when you see an NSF charge on your bank statement and realize you forgot about one of your preauthorized debit charges. It means you are likely going to be assessed a charge from the bank, and also from the service provider.
Not only can you get a pay-in-full discount, but it eliminates the possibility of forgotten charges that result in NSF fees. And when you haven’t paid for your insurance, your coverage inevitably lapses, leaving you exposed.
What Types of Insurance offer Pay-In-Full Discounts?
The types of insurance products that offer a discount to pay for your annual policy in a lump sum depends on where you live and which insurer you choose. You can find paid-in-full discounts on:
Home insurance: Select insurance providers offer discounts when you pay for your premiums in full. Allstate calls it a Responsible Payment Discount, for example.
Car insurance: Many car insurance providers offer paid-in-full discounts for vehicle owners who wish to get ahead of the game. Providers such as Liberty Mutual, Mercury Insurance, Allstate, and Farmers Insurance are all popular insurers who offer pay-in-full discounts.
States Where Paid-In-Full Discounts Are Not Allowed
In the United States, you might expect that insurance requirements are the same from one state to the next. However, only 48 of the 50 states permit paid-in-full discounts on insurance.
California and New York have state laws in place that prevent insurance companies from offering discounts based on when the premiums are paid. Everywhere else in the country, you’re able to save some cash by paying up front.