Wednesday, January 28, 2009

Paying Myself Insurance Installment Fees

J. Money at Budgets Are $exy wrote an amusing article about how much he pays for auto insurance, which got me thinking about mine.

J wrote that "a co-worker also told [him] that some companies will knock off a few dollars if you pay the entire price up front too! Never came across that... but ... [he's] a big fan of breaking them into monthly payments than paying a huge chunk anyways."

I too was a big fan of monthly installments since that was the only way I could afford my insurance. Heh heh.

The only problem with monthly installments is that my insurance carrier that shall remain nameless (but rhymes with "Ball State"), charges me $3.50/installment for the pleasure. (So I guess J's buddy was right, in a way, about getting a discount for paying the premium all at once.)

Starting this year, I've decided to suck it up, use some of my earmarked savings and just pay the doggone insurance premiums at once. (Actually, I charged it onto my credit card so I can earn cashback rewards. When it comes due, I'll pay it in full out of my earmarked savings.)

I'll then pay myself back from the money I've budgeted every month to pay for insurance. In essence, I'm now paying myself $3.50/installment x 2 (for auto and renter's insurance) per month.

Hot diggity, folks! That's $7.00/month that I'm now paying myself that I used to pay others! I'm suddenly having thoughts of world domination! I'm on my way to becoming a loan shark! Bwaaahahahaha!!!

OK, back to reality. But to give you some perspective, if I put that $7 service fee into my savings every month at 3.5% APR, I'll have nearly $4,000 by the time I turn 65. I'm just imagining what a fabulous retirement dinner that $4,000 will buy me. Bwaaaahahahaha!!!


Miss M said...

I was going to say that my insurance only charges a buck for the service, but then you mention being able to charge the premium for the cash back.... I should look into that. We pay ~$3000 a year.

Debtfree2009 said...

Every dollar counts. Or $7 in this situation.

K-money said...

I have a savings account set up for these types of payments. Every month I put 1/12th of the annual cost into the account and when the bill comes I just pay it!

Having the money ahead of time means freedom from those evil punitive fees, I'm glad you could do that for yourself!

MoneyMateKate said...

I pay almost everything annually rather than monthly - saves me about $300/year.

paranoidasteroid said...

$3.50 isn't so bad! My insurance company charges like $10 per installment!

I'm so cheap though that I only paid in installment for 6 months (shortest period they allowed) and now I plan ahead.

Finance Guy said...

Essentially, they are charging you a convenience fee.

J. Money said...

hell yeah girl, there you go! and that kills me that it "rhymes with ball state"! haha...i was dying after reading that.

it's funny how different companies are w/ things - mine gives me a CREDIT for paying it monthly! USAA is 100% online so i guess it makes sense, but i'd sure reconsider it if they tacked on some surcharges like that.

Way to pay yourself back :)

Shtinkykat said...

Miss M: $3,000/year div. 12 = $250/month! HOLY MOLEY, that's expensive insurance you got there! You'll get a nice cashback on charging that premium, girl!

Debtfree2009: I agree!

K-money: One of these days, I'll save up enough money to my insurance premiums ahead of time! In the mean time, I'll have to continue as I am. :-(

MMK: Now THAT's a nice chunk o' change! Good job.

Paranoid Asteroid: Eeek. $10/month? That's horrid. Thank goodness you pay it all at once!

FinanceGuy: Yep. And I assume the cost to manage multiple payments.

J.Money: You guessed, GEICO, right? ;-) Wow. You get a credit for monthly installments? Hmmm... this puts Finance Guy and my theory of "convenience charge" on its head. Hmmmm....

Sharon Rose said...

Hi there-way to go girl!! Fantastic savings for you!

Ms. MoneyChat said...

i pay my car insurance once a year. i haven't checked to see if that saves me money or not because my primary motivator was a reduction in monthly bills. if i could pay everything quarterly, semi-annually or even annually, i would.

Escape Brooklyn said...

I just have to say, your cartoons always make me LOL!

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