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When you pay your auto insurance premiums each and every month, it’s hard not to put your car insurance into the same category as other utility bills.
While both auto insurance payments and utilities should be put on your list of priority expenses on your budget, the two are one and the same.
The installment payments that you make to your insurer are to fulfill your duty under the financial contract that you’ve entered. If you’re questioning the term financial contract, that’s exactly what auto insurance is.
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What is a utility bill?
Very few bills fit the definition of a utility bill. When you’re trying to decide where a bill should be put on your accounting ledger or how one expense should be labeled on your monthly budget, only a few different invoices can correctly be placed into the utility payments column.
Basically, the service has to be one that’s necessary to run your home.
Utility bills are invoices that are sent by businesses that provide utility services to the general public at a specific address whether it be a personal residence or a commercial office.
In most cases, the utility services are provided by the city, county or other governmental entity. Invoices for the following services meet the utility bill definition:
Why isn’t a phone or Internet bill considered a utility bill?
If you have a home phone, which many people don’t, it might not be classified as a utility bill even though it’s attached to a certain residence.
The telecommunications provider usually isn’t a governmental service provider.
Although you are billed for usage, like the services for electricity and gas, local and long distance telecommunications services are sold by phone companies and not other regulated government agencies.
When will you be asked for a utility bill?
There are several different instances where you might be asked for a utility bill to prove either your identity or to prove your physical address.
You might wonder what a bill has to do with your identity and simply put it’s believed to show that utility services at an address are in your name. Here are various times you might be asked for utility bills:
- When you’re applying for an auto loan you may need to prove your address and your income
- You are applying for a revolving line of credit through a department store to purchase electronics or other consumer goods
- You are applying for medical insurance or other types of state-issued benefits when you fall into a low-income bracket
- Proof of residency when you’re enrolling your child in a local public school
- Proof of residency when you’re registering a vehicle or applying for a license in a new state
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You Can’t Present an Insurance Bill if You’re Asked for a Utility Bill
If you’re sifting through all of the mail pieces that you’ve received and you can’t locate a single utility bill, you might be tempted to just bring your latest insurance bill to satisfy documentation requirements.
Unfortunately, if you try to present your car insurance billing statement, it’s not going to be sufficient because it doesn’t necessarily prove you live at the address you’ve put on your policy.
Auto insurance is a very important product that you must pay for when you own a car. While it is technically a product, it’s more like a service because you’re only paying for the service that your agent offers you until you use your coverage.
Since you’re paying for protection you’re not even sure you’re going to use, there’s no way that car insurance can meet the broad definition of a utility bill.
How often will you be billed for auto insurance?
You have to pay your auto insurance in advance for your coverage to stay active. Since paying is one of the few requirements you have to comply with as consideration for the contract, you need to know when you’ll get your bills and what types of installments that you can select.
How often you’re billed for your insurance depends on how long the term is and what types of installment options are offered by the carrier. It’s common for auto insurers to give their customers flexible options to pay their bills.
They can, of course, choose to pay the premiums in full for six months or one year at a time, but they can also choose more frequent and smaller installments. Here are some of the installment options you can choose:
- Monthly – you pay your premium once each month on the same day of the month
- Automatic Monthly EFT – your equal monthly installments are deducted from the account that you gave your agent
- Quarterly – you are billed to pay off total premiums once every three months on the same date of the month each installment
- Semi-annually – you are billed to pay premiums once every six months (only available when you’re paying for an annual term)
- 5-Pay Plan (skips the last month premium) – pay a larger down payment with equal installments so that you can skip the last month’s payment
Will your monthly insurance bills vary like your utility bills?
When you buy auto insurance and you get all of the documentation in the mail within the following 30 to 60 days it will show what your total policy premium is.
It might not be the same amount that you were quoted because the policy has to be underwritten before the premiums are finalized.
Once the policy is issued, your premiums won’t change unless you make a change for that term.
One of the purposes of selling insurance in terms is because it protects you from sudden rate hikes. The insurer isn’t allowed to hike up your rates because they don’t think they are charging you enough during your term.
They can’t even charge you for a ticket or an accident as long as you’re in the middle of a term. That’s why your installments will stay level for months or even a year after a claim or ticket.
Do insurance companies have to announce rate hikes like utility companies do?
You’re not completely protected from rate hikes if your risk classification has changed. When you stay with the same insurer, it’s common practice for the insurer to run your motor vehicle reports and claims records to look for new records to rate.
The reports are run about 45 days before the renewal date on your ID cards.
If something shows up on your reports and you’re not currently being charged for the citation or accident, you’ll notice a change in your rate on your upcoming renewal bill.
In many states, the officials say that you have to receive a bill at least 30 days prior to your renewal so that you have time to shop around. If you don’t like your new rate, it’s best to use the power of comparison shopping to your advantage.
Are you billed for usage on insurance like utility companies bill for usage?
A standard insurance policy isn’t priced strictly on usage. You might have to tell your insurer that you drive the car to and from work and how much you drive each year, but you’re not going to see the rates go up or down if your usage changes from one month to the next.
If you buy a usage-based auto insurance plan, you’re going to have to agree to have a computer system or tracking device installed in your car so that the company can monitor how you’re driving, when you’re driving, and how far you’re driving.
It might feel like an invasion of privacy but it’s great if you don’t have anything to hide.
One great feature of these types of policies is that you can pay less one month if you cut back on driving.
Auto insurance might not be a utility bill. If you don’t pay your bill, it’s not going to leave you without lights or hot water, but it could be a decision that lands you in hot water if you drive uninsured. The last thing that you want to do is put yourself at risk.
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