Insurance: A Guide for the Masses

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How To Pay Home Insurance Premiums

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The premiums of a homeowners insurance policy are what you must pay to maintain the policy's coverage. There are a few different considerations to take into account when deciding how to pay your home insurance premiums.

Pay Annually or Monthly

Most insurance companies will let you pay your home insurance premiums once per year or break the cost out into equal monthly installments. If you choose to pay annually, you'll have to make the payment in full at the start of the policy's effective period. Should you choose to pay monthly, you might have to set up automatic payments so that you don't forget a month.

If you can afford to pay the full premium of your home insurance policy up front, it's usually best to do so. Not only will you have only one payment to remember and make, but you'll also likely qualify for a discount. Many insurers offer a small percent off the bill if you pay in full up front, and even a small percent on a year's premiums can be a decent amount of savings.

If you can't afford to pay your home insurance policy's premium at once, however, monthly payments let you make smaller payments that fit better into your budget. This is usually a preferable option if you don't have savings or if you're paying off debt as the interest on debt is often higher than what you might save with a pay-in-full discount.

Pay Through Escrow or Directly

When it comes to how the actual payments are sent, they may be submitted as part of an escrow payment or sent directly to your insurer. 

An escrow payment is sent to a third party, and it typically includes your mortgage payment, property taxes payment and home insurance payment when used for home-related expenses. The purpose of sending these payments through escrow is so that your mortgage lender can confirm that you're paying for property taxes and home insurance.

If payments are made directly to the insurance company, they're simply submitted by check, online payment or phone payment without showing the mortgage lender that the cost has been paid. 

Should you have a mortgage on your home, your lender will likely require that you pay your home insurance premiums via escrow. If you don't have a mortgage on your home, you're welcome to pay your homeowners insurance premiums directly to the insurance company since there's no lender that needs to make sure the payments have been made.