Should you pay annually or monthly for your home insurance?

When you're sorting out your home insurance you're often given the option to pay for it as an annual lump sum payment, or throughout the year in monthly instalments.

Find out whether it's better for you to pay monthly or annually for your home insurance with our guide.

Some home insurers will offer you the option to pay upfront for your policy as a one-off payment when you take out your home insurance 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.

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 will pay once and not have to worry about more costs until the time comes to renew or switch.

By choosing to pay upfront you are likely to have greater choice, as this is the standard option offered by most insurers.

Some people may choose to spread the cost of their home insurance over the year by making monthly home insurance payments, and many insurers offer the option to pay for this 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. The monthly repayments added together over 12 months may cost more than the single annual payment.

Some insurers do not 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.

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 will 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.

You will 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.

This is particularly true if you are arranging both home contents insurance (for your possessions inside your home) and buildings insurance (to cover the cost of rebuilding the structure of your home after storm, flood or fire).

If you have a large house and you are buying both home contents insurance and home buildings insurance, then you may have a total bill that amounts to £500 or more.

For many people this is a large amount to pay out all in one go, which is why they opt to pay their home insurance in instalments throughout the year instead.

Not all insurers charge interest on monthly payments, and instead divide the annual premium into 12 chunks which are repaid monthly instead. If that is the case then you might well decide that paying in instalments helps you to budget better over the year than trying to find the full premium all at once.

Another option is to think about budgeting for your home insurance premium well in advance of the renewal date. You could start to set aside extra savings so that you have enough money to pay for the premium in one go.

Bear in mind that even if you decide you want to pay monthly, and you have to pay a bit more in interest payments, it is still better to have a home insurance policy in place.

If you did not have home contents insurance or buildings insurance policy, and your home was damaged by fire, storm, flood or other disaster, the cost of replacing and rebuilding would run into the tends of thousands of pounds.

Therefore, it is better to have an insurance policy in place, even if it costs you a bit more over the 12 months than to miss out on having cover for your home.

If you are looking to cut the cost on your home insurance then the best option is to shop around for quotes using Uswitch. Our comparison service can show you the difference options and enable you to compare cover, policy details and cost so that you can find the best home insurance policy for your needs.

You will also be able to see whether you have an option to pay for your home insurance on an annual or monthly basis, and what the total cost will be.

By shopping around you may be able to save money on your home insurance, so that even if you choose the monthly payment option, it still works out to be good value.