Wednesday, December 16, 2009

The Price of Car Insurance

I purchased new car insurance a few months ago. As I was going through the sign-up process in-person, I was told I could pay the annual balance in full or pay month-by-month. Being a good personal finance blogger, I asked if there were any extra charges if I paid month-by-month and was told no, that I would only have to pay my full premium and I could get a 7% dividend back at the end of the year if everything is good. So, I paid a 20% downpayment and had officially purchased my very first installment of car insurance!

My first monthly bill came (last month) with no issues. However, this month's included a finance charge of 1.5% of the remaining balance. Huh?! I was never told about any finance charges! If it was a small $2 or $3 fee for the convenience of paying month-by-month online, I would be okay with it. But this was a lot more than that!

I called my insurance company this week and inquired about the charge. After being nice and letting the representative know that I never received any sort of notice or signed any agreement about it (she mentioned I should have signed a "Truth in Lending" form and received a copy of it), she eventually spoke with her supervisor and said if I paid the balance in full, that they would waive the finance charge. She also mentioned that I should call the office where I first signed up for my insurance and let the supervisor there know that I never received the notice. I kept letting her know that I felt misled, and of course thanked her for getting rid of the finance charge! The only problem is that it'll disrupt my cash flow a bit since it's a decent amount. I'm not 25 yet and live in California, so my car insurance is still somewhat pricey even with a clean driving record. But if it saves me a good chunk of money, I'd much rather do it!

How do you pay for your car insurance, in some type of installment or in one lump sum? Does your insurance charge you anything for paying a certain way?


savings December 17, 2009 at 10:38 PM  

I have AAA which gives you a finance charge of (I think), 1.5 or 2% if you choose to pay monthly. For this reason, I make one payment annually and just save the total divided by 12 in a savings account.

Must Not Shop December 17, 2009 at 10:38 PM  

I pay monthly, no fees or interest. If I had to pay any extra charges because of this though I would just pay it all up front for the year. I hate when you ask the right questions and still get duped!

me in millions December 20, 2009 at 11:13 AM  

I have Geico and I pay 2 times a year in a big lumpsome.

Anonymous December 20, 2009 at 7:24 PM  

I pay it annually on my credit card. But I pay my contents insurance quarterly (usually comes out of my side income like mystery shopping) and it's only a couple of dollars more. I'd like to eventually work up to paying that annually too.

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