Car insurance in installments: what it is and how it works?


Those who find it difficult to pay the insurance premium in full can opt for car insurance in installments. Depending on the company, there may be two or more installments to be paid. In this way, the cost of insurance is broken up and is less heavy on the family budget.

Let’s see together how installment insurance works in detail, how much it costs, how many types exist, and what to pay attention to before signing the policy.

Car insurance in installments: what it is and how it works

When we talk about car insurance in installments we mean a normal annual RCA payable in several installments. Installment insurance should therefore not be confused with temporary insurance.

In the case of insurance in installments, the coverage is valid for the whole year and the insured person has the option of paying the premium in monthly, quarterly, or half-yearly installments. In temporary insurance, on the other hand, the coverage is not valid for the whole year but only for the period for which it is insured (it can range from one day to six months).

According to IVASS, the average premium is 400 euros per year, but there are provinces where the premium even exceeds 500 euros. For many families, this is a fixed expense that can significantly affect the month’s budget. Choosing insurance in installments is a great convenience for motorists because they can ensure their car for the whole year without having to pay the premium in full in advance.

In recent years, installment offers have increased and practically all companies, or almost all, allow their customers to pay the RCA policy in several installments.

There are many offers on the market, even very different from each other, a sign that companies are increasingly trying to meet the needs of motorists and offer them customized products based on their needs.

The number of installments ranges from a minimum of two to a maximum of 12. Some companies allow you to divide the premium into two half-yearly installments, some allow a payment every three months, some offer the possibility to pay in five installments, some in ten and some in twelve, exactly one installment per month.

How to activate insurance in installments

When stipulating the insurance contract, the motorist can choose whether to pay the premium in full or to pay it in installments. Whether you choose an online company or go to a real-life insurer, you can choose your preferred number of installments and payment system.

Almost all companies limit this type of offer to car insurance and do not allow you to pay motorbike insurance or TPL for vans in installments. However, always check the contractual conditions of your company and ask for information if you intend to take out a policy for a motorcycle or a commercial vehicle.

To activate the policy, the companies require:

  1. a copy of an identity document;
  2. a copy of the tax code or health care;
  3. a copy of the 730 or Unico form, to demonstrate your income situation;
  4. the IBAN code to authorize the automatic debit of the installments on the current account.

Normally, the repayment of the installments takes place by direct debit on the current account. But the contract may provide for different payment methods, such as payment by credit card or PayPal account.

How much does installment insurance cost?

Paying your car insurance in installments can be free or not. The cost depends on how the offer is structured and whether or not the participation of a financial company is envisaged.

The car insurance in installments can be managed:

  • directly from the insurance; in this case, the installment may be free of charge or an increase in the premium may be envisaged, due to the splitting rights;
  • with the intermediation of a financial company; in this case, the payment in installments can be free, if the company proposes an offer at zero interest rate, or it can provide for the payment of a fixed interest rate.

If the contract provides for the participation of a financial company, the payment in installments is equivalent to a request for financing. The insurance company immediately collects the premium that is paid by the finance company and the motorist reimburses the intermediary, installment after installment.

How does zero-rate car insurance work

Often, insurance companies advertise interest-free auto insurance offers. The launch of these offers usually serves to attract new customers or to retain those who have already taken out a policy.

In this type of policy, paying in installments does not involve additional costs for the insured. The interest rate is zero and the management costs of the file and administrative costs are zero. The policyholder signs a loan agreement with the company’s partner finance company and repays the installments at no additional cost.

The sum of the installments is exactly equal to the annual premium to be paid. Precisely because the conditions are particularly advantageous for policyholders, this type of offer usually remains valid for a short period or is accessible to a limited number of customers, those considered the best.

How many types of installment car insurance are there?

There are at least three types of auto insurance in installments, but in reality, each company can offer different types of contracts. We have already mentioned that some companies allow you to divide the annual premium into five or ten installments.

However, the most frequent types of installments are three: monthly, quarterly, and half-yearly. Let’s see one by one what features they have and how they work.

Monthly auto insurance

Car insurance with monthly payment allows you to divide the premium into twelve equal installments. Each installment, therefore, corresponds to one-twelfth of the annual premium, plus any interest provided for in the contract.

Always remember that monthly car insurance should not be confused with monthly insuranceLet us clarify once again that in the auto insurance with monthly installments the RCA coverage lasts for the whole year; in the one-month insurance, on the other hand, the coverage lasts only for 30 days.

Car insurance with quarterly payment

If the company allows you to take out car insurance with quarterly payment, the premium is divided into four installments, each to be paid every three months.

Let’s take an example: a motorist with a policy expiring at the end of March, who has to pay an annual premium of 400 euros. The company offers him two options: to pay the full amount immediately or to pay it in installments with quarterly payment.

If he accepts the second option, he should immediately pay the first installment of 100 euros and then pay the others in June, September, and December. The amount would be 100 euros if the offer is at zero interest, or slightly higher if the contract provides for the payment of interest. The interest rate depends on the trend in rates over the period and the offers of the financial companies but usually does not exceed 10%.

Car insurance with half-yearly payment

Semi-annual car insurance is one of the most frequent offers. Often it is auto insurance in installments without financing, that is, which does not provide for the participation of a financial company that acts as an intermediary between the company and the insured. It is the same company that directly offers its customers the possibility of paying the premium in installments. 

In this case, the customer must pay two installments, each corresponding to 50% of the amount of the annual premium. Depending on the conditions of the contract, the payment in installments can be free or it can provide for the charge to the customer of the splitting rights or an interest rate.

By aamritri

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