Should you pay annually or monthly for your home insurance?

Some home insurers will offer you the option to pay upfront for your policy, or spread the cost by paying monthly. This guide outlines your options, and explains which payment method could work out to be most cost-effective.

Annual home insurance payments

For those who like to get their bills out of the way in one go, annual home insurance payments offer the solution. By paying upfront for your home insurance, you’ll pay once and not have to worry about more costs until the time comes to renew or switch.

By choosing to pay upfront you’re likely to have your pick of policies, as this is the standard option offered by most insurers.

Monthly home insurance payments

Some people may choose to spread the cost of their home insurance over the year, and many insurers offer the option to pay by Direct Debit.

Paying this way means you will avoid a large one-off payment, but this can end up costing you more over the term of your policy as your insurer may charge you interest.

Some insurers don’t offer the option to pay monthly, so by excluding these from your search on price comparison websites you risk missing out on the best deals.

Annual vs monthly: price difference

When it comes to paying monthly for your home insurance, it’s not just a case of dividing your annual premium into 12 equal parts as you might expect. You’ll usually pay a deposit upfront (around 10-15% of your annual cost, depending on the provider), followed by 10 or 11 monthly payments.

In most cases, your insurer will also charge interest if you choose to pay monthly. The amount of interest will be charged as an annual percentage rate (APR), which could be up to 40% of your annual premium.

When you add up the cost of your home insurance over the year, you’ll usually find that paying monthly will cost more overall, as you have to factor in the cost of APR and the initial deposit.

Things to consider

You’ll usually pay less for your home insurance overall if you can afford to pay upfront for the entire year. But with so many household costs to deal with, many people still prefer to pay for their home insurance in more manageable, monthly chunks.

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