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Should You Pay Homeowners Insurance Yearly or Monthly?

Updated April 4, 2024 . AmFam Team

You can pay off your homeowners premium in several ways, though your mortgage company may require you to pay it off according to their terms and conditions. Lenders usually will want you to contribute monthly into your home insurance escrow which will then pay the premium upon renewal of the policy’s term. Usually, your tax payment and escrowed private mortgage insurance (PMI) monies are collected and distributed in a similar fashion — though the payout dates may vary.

To answer the question “is homeowners insurance paid monthly or yearly,” you’ll need to consult with your lender. If you’ve paid off enough of your loan home, or if your bank doesn’t require you to escrow your homeowners insurance, the choice is up to you. You can pay the premium in monthly, quarterly or annual increments.

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Benefits of Paying Homeowners Insurance Yearly

When you close on a new home and you’re financing some or all the purchase from a lender, you may have the option to pay for your insurance monthly or annually. But you should know that there are benefits to paying the entire annual premium in one lump sum. Typically, you’ll get a lower rate than you would if you paid it monthly.

Even if your mortgage lender allows you to make monthly payments, when you’re allowed to pay the premium outright, the savings can be significant. Many insurance groups also offer other discounts to their customers, like going paperless or bundling homeowners with an auto policy.

When your mortgage provider requires you to contribute monthly to an annually-paid homeowners policy, you’re only paying your premium once a year. So, are you making monthly premium payments if you pay into an escrow account each month? Nope, but you are contributing every month towards that annual payment.

You’ll get the discount for making a single annual payment but won’t have to pay a larger sum all at once. With a monthly escrowed payment, you’ll leverage the annual payment discount when that lump sum payment is made. So, monthly contributions into an escrow account, made with your mortgage payment, are kind of like a free savings account that saves you money. Those savings translate into an annual premium discount.

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Benefits of Paying Home Insurance Premiums Monthly

After you’ve gained enough equity in your home, you’ll have other options available to you to manage your premium payment. If you’re looking for added flexibility, paying your premium either quarterly or monthly may be a better way to go. Your premium may cost you more, but you’ll have the benefit of paying in smaller increments. Is homeowners paid monthly a better answer for you and your finances? Consider which option gives you more financial security and go with that one. By making smaller payments, you may have more cash in hand for other expenses.

Other Ways to Save on Your Homeowners Insurance Premiums

One of the best ways to save cash on your insurance costs is to break down the way premiums are built. Once you understand how a quote is developed, you can adjust your policy to maximize savings.

Bundle your insurance products. You’re going to need car insurance anyway, why not bundle these two insurance products together? Doing so could help you save with a multi-line discount.

Micro-manage your credit rating. By boosting your credit score, you may be able to get the best rates that your insurance company offers. Pay off credit cards on time, or contact your credit card group and request a lower interest rate. You can also shop around for a better credit card deal then get in touch and let them know about it — they may be willing to negotiate rather than lose you as a customer. Then, direct that savings towards a bigger monthly credit card payment.

Select a higher deductible. Trim your homeowners insurance premium by electing to pay more in a deductible when or if you file a claim.

Explore different coverage limits. Selecting an insurance limit that sufficiently covers your investment can help you save. Work with your American Family Insurance agent to get base coverage that meets your needs.

How Escrow Payments Can Help You Save PMI Money

Most homeowners are paying every month into several escrow accounts. In addition to your property tax contributions and homeowners insurance payments, you may be paying monthly for your PMI. Look at these tips that can save you on your combined monthly payout.

Consider a high down payment at closing. If you place 20 percent or more into a down payment, you may be able to avoid paying the PMI altogether. That can help to save you thousands over the course of the loan.

Pay down your principal quickly. Whether it’s annual or monthly, pushing more cash towards the principal can decrease the amount of time you’ll be paying that PMI.

Get in Contact with Your Agent to Review Ways to Save

One of the best ways to manage your insurance budget is to connect with your American Family Insurance agent (Opens in a new tab). Checking in with them can help you understand exactly where to make policy adjustments that can result in big savings. While you’re at it, remember to download the MyAmFam App or enroll in My Account to leverage our paperless discount.

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This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

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