Becoming a homeowner can have a big impact on your finances. You not only have to keep up with the mortgage repayments but cover the cost of buildings and contents insurance as well. And if anything breaks in your home, you can’t just get the landlord to sort it out – you’ll have to pay for this.
If you’re looking to make more room in your budget, you might be tempted to opt for monthly payments for your home insurance instead of paying all in one go. But is this the right decision for you, and will it work out cheaper? We explore.
Annual vs monthly
Whether you opt for monthly or annual payments for insurance will depend on your finances. You might decide that annual home insurance payments are the way to go if you have the money readily available.
By opting for this, you’ll pay one sum and won’t have to worry about costs until it’s time to renew or switch. It could give you peace of mind to know that you have this bill out of the way. As annual payment is a standard option offered by most insurers, you’ll likely have more policies to choose from as well.
On the other hand, you might decide to spread the cost of home insurance over the year. This is something offered by many insurers (including thinkmoney home insurance) and most offer the option to pay by Direct Debit.
By doing this, you will avoid a large one-off payment but you might end up paying more over the term of your policy due to interest. But remember, some insurers don’t offer the option to pay monthly so you might be missing out on deals if you exclude these altogether. And you might not get accepted for paying monthly with some insurers if your credit history is poor.
There can be a price difference when paying annually and monthly. If you decide to go for monthly payments, you’ll usually pay a deposit upfront (typically 10-15% of your annual cost) followed by 10 or 11 monthly instalments.
On top of this, most insurers will charge interest as an annual percentage rate (APR). This could be up to 40% of your yearly premium. If you were to factor the cost of this overall, you’d probably find that paying monthly will cost you more in the long run than if you were to pay it all in one go.
If you have the money to hand and can afford to pay the annual cost upfront, you will usually pay less on your total home insurance. With that said, with so many bills and costs to juggle, you might prefer to pay for your home insurance in more manageable amounts.
With thinkmoney home insurance, you’ll pay an upfront deposit of 12.5% of the annual cost, and 10 monthly payments at 29.9% APR. You can find out more about thinkmoney home insurance, here.