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Monthly car insurance
Monthly car insurance
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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- What is monthly car insurance?
- What are the benefits of monthly car insurance?
- Do all car insurers offer monthly car insurance?
- How is monthly car insurance different to paying annually?
- What are the pros and cons of paying my car insurance monthly?
- How can I pay for my car insurance monthly?
- Frequently asked questions
- Where can I compare monthly car insurance options?
Long story short
Monthly car insurance makes your premium more manageable, but may come with extra fees
Paying your premium in instalments could be 10%–20% more expensive, according to the Australian Securities and Investments Commission (ASIC).
With smaller payments, you dodge a once-a-year budget blowout
But be warned, monthly car insurance means an extra bill to stay on top of each month.
Falling behind on monthly payments could cost you big time
Insurers could reject your claims or even cancel your policy if you miss your payments.
What is monthly car insurance?
Monthly car insurance is a payment option where you pay your premium over 12 monthly payments, rather than once a year. Sometimes referred to as ‘pay by the month’ car insurance, paying for car insurance monthly allows you to pay your annual premium in smaller instalments, so your bank balance doesn’t have to take that one big hit and you have options to manage your monthly budget and expenses.
Monthly car insurance may not have the set-and-forget convenience of paying your premium annually, but it can open up your car insurance options, say, if you want comprehensive cover and can’t afford to pay for it in one go.
Did you know?
As much as 54% of consumers in Australia are unaware that paying for their car insurance monthly (or in other instalments) can be costlier, according to ASIC’s industry research.
What are the benefits of monthly car insurance?
Paying for your car insurance monthly can help improve your cash flow by splitting your annual premium into smaller, more manageable payments. This can add flexibility to your monthly budget by allowing you to align your car insurance payments with your pay cycle or other monthly expenses, potentially making them easier to organise and lowering the risk of your policy lapsing due to a missed payment.
And because of the flexibility with payments, monthly car insurance could be an option if you’re on a tight budget but still prefer the features and optional extras you get with a comprehensive car insurance policy, such as new car replacement, reduced windscreen or window glass cover or possibly choice of repairer.
Do all car insurers offer monthly car insurance?
No, not all car insurance companies offer monthly car insurance, but most major insurers in Australia allow you to pay your premium monthly. That said, your options may be slim if you’re looking for insurers who offer monthly car insurance at no extra cost, as car insurance generally costs more if you pay monthly.
How is monthly car insurance different to paying annually?
Paying for a monthly car insurance policy can be around 10% to 15% more expensive than paying annually, depending on your plan and provider. However, paying monthly may work better for someone who’s on a tight budget and can’t afford the larger upfront cost when it’s time to make the annual premium payment. Monthly car insurance can also involve more frequent life admin than only having to think about your premium once a year at renewal time.
Monthly can be more expensive in the long term
Some insurance companies include extra costs such as instalment processing fees, which can make monthly car insurance more expensive in the long run. If you make a claim while on monthly instalments, some insurers may also need you to pay out the remainder of your policy’s annual premium to cover the claim.
Monthly can be easier on the hip pocket in the short term
With monthly car insurance, you generally get the same level of cover and benefits that you do when paying annually. The real benefit of pay by the month is that there’s no high up-front cost, so it can be much easier to budget for than a chunky once-off annual premium.
Monthly can be more hassle
While it has the plus side of aligning with your other monthly bills or when you get paid, the downside is you’ll need to stay on top of your payments every month – whether that’s paying manually or ensuring there’s enough money in your account for a direct debit each month. Failing to do so can impact your coverage.
Fictional scenario: Eric could save 10% to 15% by paying annually
Eric, a 40-year-old car owner in Melbourne’s inner west, compared comprehensive car insurance for his stock-standard 2017 Toyota Corolla Hatch through iSelect. He opted for a $1,000 excess and no optional extras, but was also interested in whether it would be cheaper to pay monthly or annually. Here’s what our fictional friend Eric found:
- Paying monthly for a standard comprehensive policy with basic features could cost around $1,672 to $1,851 a year, while paying annually for the same policy could reduce the premium to around $1,450 to $1,602 per year.
- For a higher-tier policy with additional features, the cost could range from $2,892 to $3,160 per year when paid monthly, compared with $2,656 to $2,911 per year when paid annually.
| Type of cover | Total premium (when paid monthly) | Total premium (when paid annually) |
|---|---|---|
| Basic comprehensive car insurance premium | $1,672–$1,851 | $1,450–$1,602 |
| Higher-tier comprehensive car insurance premium | $2,892–$3,160 | $2,656–$2,911 |
In this fictional scenario, Eric would be saving around 10% to 15% on his comprehensive policy premium if he paid his premium as an annual lump sum instead of paying it monthly instalments.
Note: This scenario is purely fictional and doesn’t reflect true comparison outcomes. The figures shown were derived from a comparison with iSelect on 7 August 2026. Actual premiums will vary based on individual circumstances, insurer underwriting criteria and policy terms.
What are the pros and cons of paying my car insurance monthly?
Paying for car insurance monthly can help improve your cash flow and offers more convenience by making your car insurance payments more manageable and flexible enough to better suit your monthly budget. That said, monthly car insurance payments can cost more overall, adds to your monthly admin and lacks the set-and-forget convenience of paying annually.
Pros
- Smaller, more affordable monthly payments
- Easier to budget for and frees up cash flow for other expenses
- Can be lined up to coincide with pay cycle and/or other monthly bills
Cons
- Usually costs more in the long run due to monthly processing fees
- You need to remember to pay each month or make sure there’s enough in your account for direct debit
- Missing just one monthly payment could lead to your claim being rejected or your policy being cancelled
How can I pay for my car insurance monthly?
An insurer that allows monthly car insurance payments may give you the option to make your premium payments on its customer portal or smartphone app. You could also set up a direct debit from your bank account, debit card or credit card. If that’s not an option, you may be able to make premium payments over the phone or in an Australia Post office.
If you’re already on an annual payment plan with your insurer, you might have to wait until your policy is up for renewal to be able to switch to monthly instalments.
Helpful tip
Comprehensive car insurance can help provide cover for things like an at-fault car accident or a hire car after you make a not-at-fault claim, weather damage or vandalism. So, if you can’t afford to pay the (typically) higher comprehensive premium upfront but also don’t want to miss out on comprehensive benefits, paying for car insurance monthly can a way to secure an advantage on both sides.
Adrian Bennett
General Manager for General Insurance
Note: To understand what car insurance covers (and doesn’t cover), refer to the policy documents for the full details of your coverage, keeping an eye out for things like exclusions and conditions of cover.
Frequently asked questions
Is monthly car insurance more expensive?
Generally, yes. While it can be an attractive option for those who prefer to budget monthly, paying for your car insurance by the month often means you could pay more in the long run, depending on your insurer and policy. In fact, paying for car insurance monthly (or fortnightly and quarterly) can be 10% to 20% more expensive than paying annually, according to ASIC’s consumer research.
Think of it this way: for a one-off annual payment you’ll pay a standard one-off processing fee. But with monthly payments, processing fees and other risk-related costs can be added to your bill every month. This means over 12 months, it’s possible you’ll end up paying more than you would if you’d paid for your car insurance annually in one go.
Ultimately, it depends on whether you’d prefer to tackle bigger costs on a yearly or monthly basis.
How can I make my monthly car insurance expenses cheaper?
For starters, paying for car insurance annually instead of monthly can help lower premiums overall – as can choosing to pay a higher excess amount than your basic excess. Also, insuring a car for its market value and not an agreed value and setting driver age restrictions can help keep premiums low.
Generally, insurance products are priced based on how much they cover. In that vein, third-party property or third-party property, fire and theft car insurance premiums can be lower than what you’d pay for comprehensive cover. But that’s because they mainly cover third-party property damage. So, while third-party policies can cover accidental loss and damage to other people’s property, they won’t cover your own car for accidental damage.
Can I change between monthly and annual payments?
Yes, but not frequently. Many insurers will allow you to switch between monthly and annual payments, but it’s likely you can only do this once a year when you renew your cover or get a new policy.
What happens if I miss a monthly car insurance payment?
If you miss your monthly repayment, your insurer may at first float a few friendly reminders your way. If you’ve missed payments and you need to make a claim, your insurer may offer a short grace period, within which they’ll still accept your claim. Some might simply refuse any claim made after a missed payment. If your payment is overdue by a month or more, your insurer can decide to cancel your policy altogether.
It’s important to let your insurer know if you’re having difficulty with making your monthly car insurance payments. They may be able to offer some financial support or solutions such as payment plans or paused payments.
Is it easier to change insurers if I’m on a monthly plan?
Not really; the process of changing insurers doesn’t depend on your payment plan. But one advantage of paying your premium monthly is that you may not have to wait for a refund of your unused premium if you cancel your policy mid-term, which can make it easier to manage your finances.
For perspective, if you cancel a policy you pay for annually, you could find yourself waiting 7 to 15 business days before you receive a refund, which can be less flexible for some.
A word to the wise – if you’re looking to change insurers while on a monthly plan, you’ll have to cancel your current policy and possibly pay a cancellation fee.
Where can I compare monthly car insurance options?
iSelect can help you compare a range of brands that might offer you the option to pay your premium monthly. You can use the iSelect comparison tool to compare car insurance quotes online from a range of well-known insurance brands across Australia.
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