Electronic Funds Transfer for Insurance Payments

Woman checking her account on her cell phone, holding a bank card

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Remembering to pay your bills on time can be a pain. You may be able avoid the hassle and save time and money by using a "set it and forget it" method of bill payment for your insurance premiums, making those due dates one less thing to worry about.

An electronic funds transfer (EFT) pays your bill automatically by transferring money from your credit card, checking account, or savings account directly to your insurance company each month. Most insurance companies accept EFT payments, preferring it as a method of payment if you can't pay in full.

Pros of EFTs

There are several advantages to using EFTs to take care of your insurance payments.

One-Time Setup

One benefit of using EFT is that you can set it up once and all future payments will be delivered on time. Your payment will be taken out of your account on the same day of every month. No more writing out a check and paying for postage, or trying to remember the password for a billing website you use infrequently.


Since credit cards need their expiration dates updated periodically, you may prefer using a checking or savings account as a source of funds instead. Those account details will never need to be changed unless you switch banks.

Ask your insurance agent what funding sources are allowed with your carrier. Some companies limit your options to only checking accounts, or don't permit the use of debit or credit cards.

Save on Fees

Insurance companies may charge payment, check processing, or service fees when you send monthly payments through the mail. These fees can range from $3 to $10 depending on the insurance carrier and your state. Typically, the fee will be reduced or even waived if you set up electronic funds transfer. Plus, you'll never have to worry about a late payment fee when your payment is set to automatically withdraw.


Even if your service fees are reduced or eliminated, you may still be responsible for paying an installment fee for the privilege of paying monthly instead of all at once.

EFT Discounts

On top of saving on payment fees, some companies even give an additional discount for choosing EFT payments. It may not be as good as the discount for paying your premium up front, but every bit helps. Ask your insurance provider if they offer discounts for selecting EFT as a payment method.

EFT Pitfalls to Avoid 

While using EFT can yield a lot of benefits, there are some hazards you should watch out for.

Switching Banks

Don’t get tripped up by switching banks and not notifying your insurance company. If you switch banks and close the account you had authorized payments to be deducted from, the insurance company can't withdraw your payment and your premium will go unpaid. Unpaid policies can cause big problems.


If your payments are interrupted by switching banks, you risk your policy being canceled for nonpayment. It's very important to update your biller right away if funding details change.

To avoid forgetting to notify a biller when switching banks, keep a list of all the bills that come out of your account each month so that you can easily update each one in the event of a change. The same applies for updating credit card numbers or expiration dates.

Switching Insurance Companies

If you make changes to your account or switch insurance companies altogether, your carrier needs time to process the change. A payment that is scheduled to be withdrawn before that time might go through even if your policy is canceled.

You should request that your EFT payments be discontinued as soon as you know you are switching carriers. Even so, it may take a couple of days for the removal to be processed, so don't wait until the last minute.


It is a good idea to cushion your bank account with enough funds to cover the scheduled EFT, even if you're canceling your policy. If the payment does go through as scheduled, the insurance company will issue you a refund for the overpayment.

Non-Sufficient Funds

It's important that you remember to keep enough money in your bank account to cover your payment. If the insurance company tries to withdraw the payment and you have non-sufficient funds, it's just as if you had bounced a check.

The bank will charge you an overdraft fee or a non-sufficient funds fee. The insurance company will likely charge you a return payment fee, too, and they may cancel your policy. If you have multiple bounced payments, the insurance company may not reinstate your policy, either. Keep a very close eye on your bank account balance, and always give yourself a cushion of extra cash to reduce the likelihood of a bounced payment.

The Bottom Line

If you have been successfully using electronic funds transfers for other bills, add your insurance company to your list of billers. The financial incentives will boost your bottom line, and the convenience is unbeatable. An electronic funds transfer is easy to set up: Call your agent or sign up on your insurance carrier's website.


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  1. Central Insurance Companies. "EFT Payment Plans: The Easy Way to Pay Insurance Premiums." Accessed May 4, 2020.

  2. The Hanover Insurance Group. "Updated Frequently Asked Questions Recurring EFT (Electronic Funds Transfer)." Accessed May 4, 2020.

  3. Farmers Insurance. "Billing Fee Explainer." Accessed May 4, 2020.

  4. GEICO. "Car Insurance Payments - How to Pay Your Bill." Accessed May 4, 2020.

  5. Nationwide. "Ways to Pay Your Nationwide Bill." Accessed May 4, 2020.

  6. Travelers. "Car Insurance Discounts." Accessed May 4, 2020.

  7. Farmers Insurance. "Billing and Payments FAQ." Accessed May 4, 2020.

  8. Grange Insurance. "Easy Pay (EFT) Questions." Accessed May 4, 2020.

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