How to pay for your car insurance

September is a month of mixed emotions for me. I am usually quite happy because it’s my birthday, but also deeply worried about how to pay for my car insurance.

This year my renewal price was an alarming £1,029 but I was able to shop around and get a much better quote for £603.75. Even though I managed to save over £400, that's still a lot of money to have to pay out in a month after taking care of other bills.

This struggle is the reality for many motorists at the moment. So what options are available to cope with the cost?

Don’t put it off

A change to vehicle insurance law in June last year is helping to keep uninsured drivers off our roads. But it also means you can’t just stop driving your vehicle and wait until you have enough money to buy insurance.

Your vehicle must be insured at all times even if you don't plan to drive it around. The only way to avoid paying insurance is to get a Statutory Off Road Notification (SORN) and to remove your vehicle from any public road.

The DVLA will be able to pick up that you have not insured your vehicle through the Motor Insurance Database. If you fail to comply you could receive a £100 penalty, have your vehicle seized and destroyed and face a court prosecution with a maximum fine of £1,000.

Pay annually - if you can

Paying off the cost of insurance in one go is the best option.

For those that have racked up years of no claims, a perfect driving record and are over the age of 25 this may not be that testing, as typically this profile of driver will have smaller insurance premiums.

But for less experienced drivers premiums can be sky-high. My premium is £603.75; not an amount I have readily available to hand over.

One solution is to put away a small amount each month into a decent easy access savings account to help with the cost come the time of renewal. Just £25 a month can bring you £300 closer to paying off your policy in one go.

For those with less foresight (like me) there are other ways to cope with the cost of an annual premium if you don’t have the cash available.

An overdraft is a cheap(ish) form of borrowing that can be arranged with your bank. Most charge an arrangement fee and interest, but in comparison to other forms of credit it won’t cost you too much if you pay it back as soon as possible. Plus, with an overdraft you will pay the annual premium with a debit card which saves on the credit card surcharges added at the checkout.

But if you don’t mind another few pounds a solid option is a 0% purchase credit card. This form of borrowing enables you some breathing space for a number of months before you start accruing interest on anything you buy.

The top card at the moment is the Tesco Clubcard credit card which offers 0% on purchases for 16 months. After that, the Halifax All in One MasterCard offers 0% for 15 months, while the Barclaycard 14/14 Platinum Visa has an even better 0% on balance transfers and purchases for 14 months. For a full round up, check out The best 0% purchase credit cards.

If you do choose this route you will need to be very disciplined and pay off the entire balance before the interest-free period ends to avoid getting into unmanageable debt. Read why a 0% credit card could mean 100% trouble for more.

Only choose monthly if you need to

Most insurers offer you the option of paying for your insurance monthly.

However, choosing to pay monthly onvolves interest being added to you premium total, meaning you pay back more in the long run for being able to cut the cost into bite sized pieces. According to recent research, monthly instalments increases the price of an average motor policy by 10.68%.

On my best quote of £603.75 the insurer offers the option to pay one payment of £60.44 plus eleven monthly payments of £57.57. This means I would be paying back a total of £693.71- that’s nearly 15% extra.

One other thing to be wary of with monthly payments is that not every insurer offers this option. So you could be sacrificing your best quote for a next best quote that allows this flexibility, but costs hundreds of pounds more-even before the APR is added.

How to keep premiums down

Don't forget you can drive down the cost of your policy before making your choice. Here are a few tips:

• If you drive under 12,000 miles your policy could be cheaper.
• Parking your car in a secure place like a driveway or a garage will drive down the cost.
• Try adding another driver to see if they reduce the price.
• Keeping your no claims bonus intact is important; try not to claim if you can cover the cost yourself.
• Consider using a black box to monitor your driving and lower your premium. See how a black box can cut the cost of your car insurance and car insurance: putting telematics to the test
• Opt out of expensive and unnecessary extras like car hire and breakdown cover. See essential car insurance features for help sifting through what you really need.
• Get the value of your car right. Overestimating will boost the cost of the premium.

For more ways to save read: 25 ways to cut your car insurance.

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The cheapest cars to insure

Save money with specialist car insurance

The best car insurance incentives and freebies