For many of us, the cost of insurance can seem daunting, particularly if you have multiple policies. Paying for policies such as house, contents and car insurance requires a degree of budgeting. Most insurers allow you to pay in one of two ways: in one lump sum to get coverage for the year, or in 11 or 12 monthly installments. Some consumers choose to pay monthly as it is the only way they can afford the premiums, and some prefer to pay up front as it is cheaper. Here are the positives and negatives to both options.
Spread the Cost
The biggest advantage of paying your insurance in monthly installments is that you spread the cost. This could be especially useful if you are, for example, a young driver paying hefty premiums. Monthly payments can be much more manageable, allowing you to budget month to month, but they do work out to be more expensive. This is because you are essentially taking out a loan with the insurance company and have to pay interest on the amount borrowed.
Also consider your financial stability. If paying for insurance upfront will eat up all your savings and put strain on other areas of your budget, it would be wise to consider monthly repayments. This allows a little cushion should you need the funds in the next 12 months.
Improve your peace of mind
For many, the decision between monthly and annual repayments comes down to affordability. If you cannot comfortably afford to pay upfront without it affecting your finances, paying monthly will give you greater peace of mind knowing that you can manage your finances realistically. Entering into a monthly repayment plan will also improve your credit score – provided you stick to the repayment plan. (But remember, you could damage your credit score if you miss payments, and you might not be able to get insurance if you have a very low credit score.)
Insurance is accessible to everyone
Accessibility is another huge benefit of monthly payments. Not everyone can afford to pay the premium upfront. By spreading the cost over a period of 12 months, insurance can become far more accessible to everyone. For most people, the pleasure of being protected far exceeds the slight increased cost of paying over 12 months.
How to reduce the cost of your monthly premiums
If monthly repayments are your only option, there are a few ways to bring down the cost.
- Agree to pay a higher excess in the event of a claim
- Maximise your security measures eg around your house and in your vehicle
- Insuring a number of policies (such as car and house insurance) with the same underwriter can mean you qualify for a discount.
- Choose a smaller, less powerful car in one of the lower insurance groups, and choose fully comprehensive insurance
- Shop around for the best deal every year – a broker such as Britton Insurance will do the hard work for you.
Talk to Britton Insurance
Whether you’ve made your mind about paying monthly or you are ready to pay upfront, be sure to get quotes from multiple insurers. Here at Britton Insurance, we will compare quotes from multiple insurers to help you find the best insurance deal available to us for your particular requirements. Whether you are a first-time purchaser, have a tight budget or have other specific needs, we will take the time to understand your situation before suggesting any options.