Home-owners Pay for Privilege of Monthly Insurance Instalments

CHESTER, England, September 20, 2011 -

- Paying monthly for home insurance can add an average 11.89 per cent to the cost of the original premium with some insurers

Homeowners looking to spread the cost of home insurance may wish to pay by monthly instalments, but research by moneysupermarket.com reveals there can be extra costs involved, and shows how these can vary between providers.

Analysis by Britain’s number one comparison site found consumers who want to pay their annual home insurance premium in monthly instalments may have to pay extra for the privilege.^[1] The research found that on average homeowners could expect to pay an additional 11.89 per cent on top of the cost of the original premium.^[2] However, by shopping around for the best deal, the extra cost could be reduced to 5.36 per cent, and in some cases, zero per cent.

Pete Harrison, insurance expert at moneysupermarket.com, said: “Paying for home insurance on a monthly basis is a great way to help manage the household budget - ensuring the cost is spread out over the year, rather than taking the hit of a one-off payment. Homeowners need to be aware, however, that choosing to manage their finances in this way can come with an additional price tag. While not all providers charge an APR for those wishing to pay by monthly instalments, it’s essential to search the whole market to see who does charge, and what percentage they ask for, before comparing this against the rates from those who don’t, to find the most reasonably priced deal.”

Financially savvy home-owners could also consider opting for a zero per cent purchase credit card to pay off their insurance premium, but this should only be an option for disciplined consumers. Anyone funding their insurance in this way should make sure they pay off the transaction within 12 months; otherwise they will end up still paying for their insurance when the policy is due for renewal.

Pete Harrison continued: “Using a zero per cent purchase credit card to pay for home insurance allows people to spread the cost over monthly instalments without accruing interest. However, credit card users need to be disciplined and look to pay off the balance within 12 months otherwise or before the promotional rate expires, whichever comes first, otherwise you may end up paying for insurance which is no longer valid and have to pay for a new policy as well.”

moneysupermarket.com’s top tips for cheaper home insurance premiums:

• Know the difference between voluntary excess and compulsory excess - Some insurance policies have a compulsory excess which must be paid. A voluntary excess only applies if the policyholder has added it to their policy. Voluntary excess can be used to help reduce the insurance premium. However, people need to be aware that in the event of a claim, the voluntary excess and the compulsory excess together can be expensive.
• Think about your cover - Do you really need accidental damage cover? This can increase premiums by 25%. Think carefully about the add-ons you need.
• Don’t claim unless you need to - The fewer the claims, the higher your no claims discount. So for minor issues that would be inexpensive for you to cover with your own cash, think twice before making a claim.
• Change the locks - If you’ve moved to a new home you never know who might still have a key. It is important to maintain locks. Five-lever mortise locks are recommended for external doors while windows should ideally have two bolt locks.
• Install a good home security system - Sometimes there are alarm systems that might be preferred by an insurer. The NACOSS standard alarm can cut premiums with some companies by 7.5%.
• Time-switch lights - Your home is more vulnerable to theft when you are not around. Time-switch lights will give the impression that you are at home.
• If you are away - Remember to cancel newspaper and milk deliveries and ask someone you can trust to open and close the curtains and collect mail.
• Keys - Don’t leave them in obvious places such as under a doormat. Also beware of ‘hook n crook’ thefts - where keys are left so close to a door that a burglar can simply hook them through a letterbox and open the door.
• Install security lighting - illuminate your visitors for their safety as well as your own. Unwelcome visitors are less likely to loiter if they’re ‘in the spotlight’.
• Join a neighbourhood watch campaign - this can help to reduce your premium if you inform the home insurance company of your participation in a scheme. It can reduce your premiums by up to 5%.
• Avoid frozen and burst pipes - If you think pipes are frozen, turn off water at the valve and header tank to cut down the water that can escape.
• Look out for subsidence - One of the most common problems to affect the home but usually covered in your building insurance policy. Look to see the excess level on subsidence and if your garden walls are covered.
• Fire - Fit a smoke alarm and take simple steps to avoid accidents. Most fires in the home are caused by smoking or cooking; never smoke in bed, don’t leave cigarettes lying around and don’t leave cooking unattended. Other fire tips include closing doors at night to contain fires, check the home is safe before going to bed and keep matches away from children.
• Don’t smoke - As covered above, the fire risk greatly increases if you smoke cigarettes. Most insurers will now ask if you are a smoker.

Notes to editors:

^[1]Home insurance monthly repayment structure typically involves an initial deposit (around the value of two months instalments) - the remaining balance is then paid as a set amount over nine or ten months.

^[2]On average the percentage increase to the original cost of an annual policy by paying an insurer in monthly instalments (based on the insurer’s APR) is 11.89 per cent - based on a selection of home insurance providers on 19.09.11 

Full breakdown of percentage additional costs and providers which do not charge APR on monthly instalments is available on request.

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