What Are The Payment Methods For Insurance in California?

Paying for insurance premium in California can be done via different modes, depending on the type of policy and the insured's preference. The initial payment to start insurance coverage in California is typically made via a check, debit card, credit card, electronic funds transfer, or by using premium financing. Consequent insurance bills (if the policy was not paid in full) can be done in a variety of ways:

• Mail - most insurance companies send insurance bills through mail by default. If you are paying your insurance bill by mail, using your checking account or money order, do not forget to write down the policy number on the check (or money order) before placing it in the return envelope and sending it back. Otherwise the insurance company may not know to which account this payment should be applied and now your payment could be late.
• Automatic Payments - where you enroll into the easy pay payment plan and then the payment is processed automatically on a predetermined schedule. Such an automatic payment plan is typically tied to a bank savings or checking account which is debited according to the schedule.
• Pay Online - online payments are typically available as part of the automatic payment system and on an as-needed basis for one-time payments. So, if you forget to mail in the check payment, you can make the payment immediately online. (NOTE: If paying an insurance premium in California with a credit card - the insurer is prohibited from charging any extra surcharges or convenience fees).
• Phone - every insurance company offers a phone number where the insured can call in and make a payment with the assistance of an operator.
• Insurance Agent - your insurance agent represents the insurer whose policy they helped you purchase. You can give the premium payment to your insurance agent and they will pass it on to the insurer.

The modes of paying insurance premiums in California include:

• Regular premium payment: This is the most common and preferred way most Californians pay for their insurance policies. Types of regular premium payments are:
  • Annual: A lump-sum premium payment that is made once a year. If payment discounts are offered by the insurance company, the annual premium can usually help you save money, because it relieves the insurer from the costs associated with processing additional payments.
  • Semi-annual: A premium payment that is made every 6 months
  • Quarterly: A premium payment that is made every 3 months
  • Monthly Premium: This is the most common mode of premium payment. It allows insureds to pay a small amount every month to keep their policy active
• Single premium payment: This mode of payment is less frequent because it requires making a one-time full, upfront premium payment regardless of the policy duration. One advantage of the mode of premium payment is that your policy will never lapse.
• Limited premium payment: This ensures all premiums are paid within a specific period, like 5 or 10 years. This allows the insured to finish paying their premiums within a short time, even if their insurance coverage can last for a longer time
• Premium Financing: Individuals and businesses whose policy type requires that they pay the premium upfront, but cannot afford them, can take advantage of premium financing. This allows a premium finance company to pay the insurance premium on your behalf, and the money is repaid to the lender on a monthly basis plus the agreed upon interest.

Health Insurance

Most Californians pay their health care services insurance premiums every month. However, employers who offer a group health plan might require employees to pay part of the premiums from their payroll (typically bi-weekly). In addition, employers that offer dependent coverage may require insureds to pay premiums in full to enjoy such benefits.

The grace period on health insurance premium in California is 30 days, unless the policy was purchased on Covered California using subsidies. In this case, the grace period is extended by an additional 60 days, for a total of 90 days (3 months).

Auto Insurance

Most auto insurance companies selling car insurance in California allow insureds to pay their car premiums in installments, which could be monthly, quarterly, semi-annually, or annually. However, commercial auto insurers are typically paid upfront. This may be financially burdensome for startups and small businesses, but with premium finance loans, they can make the necessary payments without experiencing policy lapses. Businesses can use premium finance loans to make the premium payment in full for them and then make smaller and more manageable monthly payments to the lender.

NOTE: The grace period for car insurance in California is at least 60 days from the due date. This is an extension which was authorized during the Covid-19 pandemic in 2020.

Residential Insurance

You can pay your California residential insurance premiums directly to your insurer or in monthly payments through an escrow account, if the property is being financed. If an escrow option is chosen, your mortgage lender will set aside a portion of your mortgage payment to take care of your residential insurance premiums. If the insurance coverage cost goes up, the lender covers the difference and then requests that you make additional payments into escrow, to cover the overage. Alternatively, you can pay your premiums directly to your home insurance company on a monthly, quarterly, semi-annually, or annually basis.

NOTE: Due to the 2020 Covid extension, home insurance in California also has a grace period of at least 60 days.

Commercial Insurance

Some California commercial insurance companies offer premium payment plans, while most require businesses to pay insurance premiums annually - in full. If businesses cannot afford or choose not to pay annual payments in full, they can get premium finance loans to pay for their commercial insurance premiums and then repay the loans monthly with the interest. Typical commercial premium financing in California costs an additional 7 to 12 percent in annual interest. Speak with your commercial insurance agent for a list of premium finance options.

Grace period for commercial insurance in California is 60 days.

Life Insurance

Life insurers that sell policies in California allow insureds to pay their premium regularly: monthly, quarterly, semi-annually, and annually. Some life insurance policies may require an annual premium payment in full if you want to pay your permanent life insurance premiums with the money in your cash value account. High-net-worth individuals can use their assets as collateral to get premium finance loans to pay their life insurance premiums.

The grace period for group and individual life insurance policies offered to California residents, is at least 60 days.

Disaster Insurance

In California, disaster insurance companies collect disaster insurance premiums annually. For the residential properties that are financed and disaster insurance is paid through escrow, similar to homeowners insurance, the payment is paid by the insured in monthly installments to the bank, and the bank makes the annual payment to the insurer. Businesses pay for disaster insurance coverage in full either by writing a check or through premium financing.

Speak with a California-licensed insurance agent for more information on premiums payment. The agent can recommend ways to get premium finance loans and the best mode of payment that will suit your budget.

Insurance Payment FAQ:

Here are some additional common insurance payment questions:

Can You Pay for Insurance With Cash in California?

Most non-commercial insurance in California can be paid in cash if there is a local insurance office. Most commonly, this is done for car insurance. Contact your insurer prior to bringing cash, to verify that cash is accepted and that there is enough change on hand. If cash is not accepted, you can use it to purchase a money order or a cashier’s check at the post office or a bank and pay your insurance with those.

What Happens If You Are Late on Insurance Payment in California?

If you are late on paying insurance by the due date, most California insurance policies give you an extension (grace period) on the payment, during which you have a chance to pay, so the policy is not canceled, Due to the Covid-19 pandemic, California insurance commissioner authorized a grace period for a minimum of 60 days past the due date. If the insurance payment is not made within the grace period, the policy will lapse, the insurer will cancel the policy, and you will need to shop for new coverage.

The 60-day extension was done as a blanket measure for all insurance and is meant to be a temporary measure. If it is reversed, the grace period on most policies is between 10 and 31 days.