Updated on 26 Dec 2025
Buying a car in India does not stop with driving it home. Every vehicle on the road needs insurance, both for legal reasons and for protection from accidents, theft or unexpected repairs. One question almost every car owner faces is: should car insurance be paid once a year or in smaller monthly instalments? The answer is, it's flexible as it depends on budget, lifestyle and convenience of the person.
In this blog, we will look at how four-wheeler insurance payments work, the difference between monthly and annual payments and which option might be right for you.
How car insurance payments work
Insurance companies calculate the yearly premium amount after considering several factors like type of car, driving history, age of the driver, location of the vehicle and type of insurance cover chosen.
Once the premium is calculated, the policyholder can choose how to pay it. There are two main options:
Annual payment: Paying the whole premium at once for the entire year.
Monthly payment: Splitting the annual premium into 12 instalments.
Paying for car insurance annually
Paying annually is the traditional way of buying car insurance in India. Here are some key points about this method:
- Single payment: The full premium is paid once at the start of the policy.
- Less paperwork: Since payment is done once, there are fewer reminders and transactions.
- Better planning: Car owners can keep insurance as a once-a-year financial task.
- Fewer chances of missed payments: With no monthly instalments, there is less risk of forgetting due dates.
Paying for car insurance monthly
Monthly payment divides the annual premium into smaller amounts. This method is chosen by people who prefer spreading costs. Important points about monthly payments include:
- Budget-friendly: Small monthly payments may be easier for those with tight cash flow.
- More flexibility: Drivers may stop or switch insurers more easily when payments are made monthly.
- Frequent reminders: Message or email notifications for monthly due dates keep the person alert, but may also feel like a regular burden.
- Possible extra charges: Some companies may add service charges for monthly instalments.
Which is better: monthly vs annual car insurance?
The better option depends on personal and financial conditions.
Choose annual payment if:
- You can manage one large payment.
- You prefer fewer hassles with reminders.
- You want to finish the process in one step.
Choose the monthly payment if:
- You prefer smaller, manageable amounts.
- You do not want to lock in a large sum at once.
- You like flexibility in case of changing policies.
Things to consider before choosing a payment plan
Before deciding between monthly and annual car insurance, it may be useful to think about certain things:
- Personal budget: Check if you can handle a large payment or need smaller instalments.
- Discipline with payments: If you often miss due dates, annual payment may be safer.
- Charges or interest: Some monthly plans may cost slightly more due to extra fees.
- Convenience: Think about whether you want fewer reminders or regular, smaller payments.
- No claim bonus in car insurance: If you have not made any claim during the policy term, you may get a discount at renewal. The no-claim bonus in car insurance can reduce the overall premium, whether you pay annually or monthly.
- Length of use: If you plan to keep the car insured for a long time, an annual payment may feel smoother.
Conclusion
Four-wheeler insurance in India can be paid either monthly or annually. The annual option involves one large payment and fewer reminders, while the monthly option divides the cost into smaller amounts for easier management. Both give the same cover, so the choice depends on personal finances, comfort with payments and long-term planning.
Whether you choose a monthly or yearly premium payment is the second thing; first, you should make sure you have the best car insurance. Get tailored vehicle policy advice to obtain the ideal plan by filling out the form on this page.
Frequently asked questions
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Is annual car insurance cheaper than monthly?
Annual payment may sometimes be cheaper because monthly instalments might include extra service charges.
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Can I switch from a monthly to an annual payment?
Yes, many insurers allow switching, but terms and conditions may apply.
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What happens if I miss a monthly payment?
Missing a payment may cause late fees, and in some cases, it might affect the validity of the cover.
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Is car insurance compulsory in India?
Yes, it is a legal requirement to have at least basic third-party car insurance in India.
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Can I cancel my annual car insurance in the middle of the year?
Yes, cancellation is possible, but refunds depend on the company’s rules and how long the policy has been active.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.