COMMENT
Pay Less For Your Insurance

When it comes to renewing your house or car insurance, do you generally pay the whole lot up front or do you tend to take advantage of the 'convenience' of being able to pay in monthly instalments?

If it's the latter then be warned that you're probably paying for the privilege and that it could be adding as much as 25% to your premiums.

Many insurers charge customers extra to pay for their car, home and contents insurance policies on a monthly basis because they treat you as a borrower. Effectively, they make you take out a loan from them because you can't find several hundred pounds all in one go. And yet there's no law that says your house and car insurance needs to be paid a whole year in advance.

Take the AA for example. At the moment they're offering a 7.5% discount if you buy a car insurance policy online. But it's only when you read the small print that you discover it'll cost you a whopping 24.9% APR if you want to spread your payments over 12 months. And yet they're offering personal loans for as little as 5.8%! 

Nevertheless, I don't see how they justify these charges when the Bank of England base rate stands at a mere 4.75%. I suppose one could say that those who do pay up front should get some benefit for doing so but with some companies charging what can amount to a quarter as much again for those who can't afford to still seems excessive!

The trick, of course, is to try and put aside a little extra each month – in a high interest savings account, naturally – so that when the annual bill arrives, you've got the money to pay for it. If that's not a possibility then at least pay for the lot on a 0% or low-rate credit card so you're not paying such a huge amount of interest!

Find out more from our Insurance Centre and use a 0% Credit Card to buy your cover.