Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: May 18, 2022

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Insurance can be a service with one of the biggest expense tags in our monthly budgets. Unfortunately, this doesn’t seem to stop insurers from tacking on fees when they sell us policies.

While some are impossible to dodge, you may have more of a say than you think in what your monthly payments are going to be.

Let’s look at the top five most common fees added to insurance policies and determine whether or not they can be avoided. Anything to bring the cost of what we pay per month lower! To find affordable insurance coverage from providers near you, enter your ZIp code into our free quote tool.

1. Policy fee

You would think that with insurance, a policy fee would simply be part of the overall insurance premium you pay. Unfortunately, this is not the case, and the cost is completely separate.

The reason this fee is separate relates to how insurers must perform their accounting. Without going into too much detail, your policy premium is tracked separately from the policy fee based on requirements from insurance regulators.

For the record, not every insurer chooses to charge a policy fee.

Tip: Use a calculator rather than your emotions when it comes to policy fees. If the premium with a policy fee is cheaper than the one without, go with the cheaper overall policy – assuming the coverage is comparable!

This fee is not negotiable, as it is “filed” and approved with your State Department of Insurance. So while your insurance agent isn’t going to be able to do anything about the fee, they’ll be able to point you in the direction of a policy that would end up saving you money.

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2. Broker/agency fee

Insurance salespeople can be referred to as agents or brokers depending on which state you live in. In some states, a broker’s only form of compensation may be their “broker fee.” Fair enough, right?

On the flip side, some insurance agents may charge an agency or broker fee on top of the commission they are paid by the insurance company that issued the policy.

While this is not an illegal practice, you may be getting gouged on what you’re paying for insurance monthly. Your best bet is to ask questions if you see this type of fee. Get it in writing from customer service if you are told it’s a mandatory charge. You can also contact other agents in the area and ask if they charge the fee. Most customer service agents will have to be upfront about these fees.

Buy insurance from the agent that doesn’t charge the fee – if the coverage is comparable.

3. Inspection fee

This fee is most common with a homeowner’s insurance policy. Let’s face it. Home insurers need to verify the home they are insuring is everything you said it was when applying for coverage.

The inspection fee is what the insurer charges to recoup the costs of paying someone to go to the property and make sure everything adds up.

Not every insurer inspects every home, but you should expect an inspection to take place when you purchase a new policy, and for there to be a cost associated with it.

Unfavorable inspection results may lead to policy cancellation or a non-renewal of coverage.

4. Installment fees

Insurers prefer to have policies paid in full at inception. Doing so often results in a discount on your overall premium. Paid-in-full policies cost the insurer less money than those that are paid overtime. No stamps, no potential missed payments…you see where we’re going here.

Installment fees are designed to help insurers recoup the costs associated with not paying your policy in full on day one. In addition to the possible additional costs mentioned above, insurers spend millions of dollars each year on postage alone just to send us our bills or to maintain computer software that processes our electronic payments.

Most insurers are going to charge you between $2 and $15 dollars to spread your premium payments over the entire term of the policy. Typically, your installment fee will be on the lower end if you signed up for an electronic funds transfer. Billing by mail costs the insurer more, so it will cost you more.

Be sure to include the installment fee in your overall insurance expense when shopping your premiums if you don’t plan to pay in full. Essentially, if you have an annual cost versus paying monthly amounts, you’ll pay less. Something to look into!

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5. Late Fee

Not only are we charged for spreading out our payments, but we may also incur late fees when we don’t get our premium payments to the insurer on time. The dreaded non-sufficient funds’ fee fits into this category.

Put simply, pay on time, every time, and if you are set up on an electronic funds transfer, make sure the money is there when your insurance company pings your account to get it. Automatic payments can cut down on the anxiety of remembering to pay your bill on time, but you also have to make sure the funds are there.

6. Bonus fee

Yes, we recognize that is an oxymoron. The words “bonus” and “fee” should not be in the same sentence. However, if your policy cancels for non-payment of premium, you may have the opportunity to reinstate your coverage with no lapse, though it usually comes at the price of a small fee.

If you are fortunate enough to be within the reinstatement period (if too much time hasn’t gone by since your policy was canceled), you will likely have to pay this fee. Expect to shell out about $25 for this one. You’ll also have to sign a statement of no-loss before you’re on your way.

This might sound ridiculous, but you are better off having a policy with no lapse in coverage when your next policy term starts. Insurers usually charge a hefty amount of additional premium to those of us that let our coverage expire. Set deadline reminders, leave sticky notes around, and do anything you can to avoid this ‘bonus’ fee.

If you’re shopping for a new insurance policy or provider, no matter the type of coverage, chances are that you can save today by entering your ZIP code into our free online quote tool.