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Paying for Car Insurance Monthly
Paying for Car Insurance Monthly
Written by
Kervin Mathew
Edited by
Laura Crowden
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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What is monthly car insurance?
to paying annually?
Long story short
Monthly car insurance spreads costs but may cost you more overall
Some insurers can charge extra fees for paying monthly, meaning all up it works out more expensive than paying annually.
With smaller payments, you dodge a once-a-year budget blowout
But be warned, monthly car insurance means 12 extra bills to stay on top of each year.
Falling behind on monthly payments could cost you big time
We’re talking rejected claims or even policy cancellation.
What is monthly car insurance?
First things first – monthly car insurance is not a ‘type’ of car insurance but rather a different way to pay for your car insurance.
Sometimes referred to as ‘pay by the month’ car insurance, it allows you to divvy up your annual premium over 12 months so your bank balance doesn’t have to take that once-a-year big hit. It may not have the set-and-forget convenience of paying annually, but monthly car insurance might suit someone who, say, wants comprehensive cover but can’t afford to pay for it in one go.
Better for budgeting
As far as other benefits go, pay by the month car insurance can help improve your cash flow and align your car insurance payments with your pay cycle or other monthly expenses, potentially making them easier to organise.
In a nutshell, your choice to go with monthly car insurance comes down to how you like to manage your expenses and what you can afford. It could be a good option if you’re on a tight budget but at the same time you don’t want to shortchange yourself when it comes to insuring your car.
Do all car insurers offer monthly car insurance?
No – but if you’re looking to pay monthly, you won’t be strapped for choice as most major Aussie insurers give you the option to pay for car insurance monthly. However, your options may be slim if you’re looking for insurers who offer pay by the month car insurance at no extra cost – as car insurance generally costs more if you pay monthly.
How is pay by the month car insurance different to paying annually?
For one thing, it’s easier on the pocket in the short term
Technically, it’s not different – you get the same coverage and benefits that you do when paying annually. The real benefit of pay by the month is there’s no large upfront cost and so can be much easier to budget for. But keep in mind that some insurers include extra costs like instalment processing fees which can make monthly car insurance more expensive in the long run.
Monthly car insurance payments can add to your life admin
While it has the plus-side of aligning with your other monthly bills or when you get paid, you’ll need to stay on top of your payments every month – whether it’s paying manually or ensuring there’s enough money in your account for a direct debit. Failing to do so can impact your coverage.
Here are some useful pointers if you’re thinking about paying your car insurance monthly:
- You may come across insurers who are willing to offer car insurance on monthly instalments at no extra cost.1For more information, see moneysmart.gov.au – Choosing car insurance
- Pay by the month car insurance may not be available with all insurers.
- Some insurers offer even more frequent fortnightly payment options.
- If you make a claim while on monthly instalments, some insurers may need you to pay out the remainder of your policy’s annual premium to cover the claim.
What are the pros and cons of paying your car insurance monthly?
| Pros | Cons |
 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 No long-term commitment so can be easier to switch policies or insurers |  Usually costs more in the long-run due to monthly processing fees Remembering to pay each month or making sure there’s enough in your account for direct debit = more life admin! Missing just one monthly payment can lead to rejected claims or your policy lapsing |
How can I pay my car insurance monthly?
First, it depends on who you are insured with and whether or not they offer monthly payments as an option. There may be providers who only offer annual payments.
Assuming you’re in the clear to get on monthly instalments, your insurer may offer online payments through their customer portal or via their app. Or, you may be able to make 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 car insurance.
Helpful tip
If you want comprehensive cover, but think you can’t afford it, paying your premium monthly may be the way to go. Because you’re splitting the annual premium into 12 manageable instalments, you get the benefits and peace of mind that only comes with a comprehensive policy – things like cover for accidental or weather damage and optional extras – without feeling the pinch of the larger upfront cost.
Adrian Bennett
General Manager for General Insurance
Frequently asked questions
Is monthly car insurance more expensive?
Generally, yes. While it’s an attractive option for those who prefer to budget monthly, paying for your car insurance by the month often means you’ll pay more in the long run.
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 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.
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 could only do this once a year when you renew your cover.
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 grace period of, say, two weeks 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?
Yes! This is one of the benefits of paying your premium monthly. If you switch insurers while on monthly payments, you’re not stuck paying processing fees on the remaining instalments.
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. Your insurer may even require you to pay any premium you still owe them.
Considering monthly car insurance?
If you’re looking at car insurance you can pay for by the month, it’s important to consider the level of cover you’re after, so it not only fits your budget by also your needs. Use the iSelect car insurance comparison tool to get started and we’ll help narrow down your search.
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