ASK KIM
Consider Auto Insurance Installments
by Kimberly Lankford

I have rather expensive car insurance (about $2,000 for six months). Would it be better to pay it in six installments or up front? If I choose installments and the car is totaled in one or two months, will I get any of my money back?

Choosing between the installment plan and lump sum all depends on your cash flow situation. There's usually a small fee to pay if you choose installments -- the amount varies by state but is typically no more than a few dollars per payment, says Kevin Craiglow, a spokesman for Nationwide Insurance. That fee can be worth it because you'll be holding onto the use of the money for several extra months, which can make a big difference depending on when your other bills are due.

If the installment plan would be better for your budget, ask your insurer if there is any way to get around the fee. Nationwide, for example, waives that charge for policyholders who sign up to have the premiums taken directly from their checking accounts every month. If you choose to pay monthly, an automated payment plan is a good idea. You're less likely to miss a payment and risk losing your coverage. Even if you reinstate a lapsed policy before you have an accident, your rate could still suffer -- insurers generally charge more for policyholders who don't have continuous coverage.

If you decide to pay for the whole term up front, though, don't worry about getting stuck paying for coverage you didn't use. If you cancel the policy -- either because you sell the car or total it -- you'll receive reimbursement for the months you had paid for in advance but didn't use.