A question from the original post that I didn't answer, was what would happen if a host goes under and ceases operations during the year? Well, they would legally owe you some sort of compensation for your unused prepaid balance. This might mean transferring you to another hosting company, or a cash refund. The same would apply for monthly payments, just in a smaller amount. Now, I'm no bankruptcy lawyer (I only play one on a hit TV show), but I suspect that you would be considered an unsecured creditor, and thus at the back of the line for receiving any compensation from the liquidation of assets (if operations cease and the company is liquidated, such as Chapter 7). More likely, the hosting company would continue operations in some manner (Chapter 11), giving you time to decide if you want to bail out at the end of your contract.
Sure, you take some risk by paying a year in advance, but the chances of an established firm abruptly ceasing operations (and not compensating you) is fairly small. Balance that against the cost savings of annual payment over monthly payments (both the resulting monthly cost and your time to deal with it), and you're likely to come out ahead by paying annually.