The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.

Should You Pay Home Insurance Monthly or Annually?

Cheap Home Insurance in Your Area

Quickly compare over 3 dozen UK insurance providers. Only one form to fill out.

{"applyCallToAction":"Get Quotes","defaultSelectedItem":"home","description":"Quickly compare over 3 dozen UK insurance providers. Only one form to fill out.","formType":"Insurance","onCurrent":true,"options":[{"label":"Car Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fcar%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"car"},{"label":"Home Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fhome%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"home"},{"label":"Motorbike Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fbike%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"motorbike"},{"label":"Pet Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=https%3A%2F%2Fwww.comparecover.com%2Fxml%2Faffiliate.cfm%3Faffiliate%3Dnimblefins%26affiliatenumber%3D223%26type%3Dpet","value":"pet"},{"label":"Travel Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=https%3A%2F%2Fwww.comparecover.com%2Fxml%2Faffiliate.cfm%3Faffiliate%3Dnimblefins%26affiliatenumber%3D223%26type%3Dtravel","value":"travel"}],"title":"Cheap Home Insurance in Your Area"}

The best home insurance plans can easily cost a few hundred pounds a year—should you pay the premium upfront once a year or should you pay monthly?

Generally speaking, if you have the cash we recommend paying annually to avoid interest charges associated with monthly payments (borrowing money from the insurance company usually comes at a cost)—in fact, paying upfront is one of the simplest ways to save money on home insurance

We'll discuss what APR you should expect and the typical size of interest charges, should you decide upon paying insurance via monthly payments instead of annually. We'll also discuss the pros and cons of an alternative solution to spread out your insurance payments—putting your annual home insurance payment on a credit card.

What's the Cost to Pay Home Insurance Monthly Instead of Annually?

By opting to pay monthly, most people would pay around £34.47 extra a year due to interest payments—this reflects a 23.2% APR on a policy costing £265 per year (which we found to be the average cost of Buildings & Contents Insurance policies.

How Much is the APR on Home Insurance?

Out of the dozen or so insurers we surveyed, we found that two offered a monthly payment option for no extra charge—that is, 0% APR. In that case, for example, a policy costing £120 a year would cost £10 a month with 0% APR (£120/12 months = £10 per month).

Most insurers, however, impose a charge for paying monthly instead of annually (upfront). We found the range of non-zero APRs to be 16.7% to 29.8%, with an average of 23.2%. We have not surveyed the entire market—only Tesco, Hiscox, John Lewis, Admiral, First Direct, Aviva, Churchill, LV=, Post Office and Direct Line—so please use these numbers for general guidance and informational purposes only.

APR on home insurance monthly payments

The True Cost of Paying Monthly Depends Upon APR and Premium

How much extra will it cost to pay monthly? By paying monthly, you're likely to incur interest charges. In order to understand the real cost to you of these interest charges, consider both the APR and the annual premium. In the table below, you can see an analysis of some typical values, to get a rough idea of the additional cost (i.e., interest charges) from monthly payments vs. annual payments.

Potential Interest Charges due to Paying Monthly for Home Insurance

Buildings & Contents Annual Premium16.70% (Approx Min APR)29.80% (Approx Max APR)23.20% (Average APR)
£130£12.06£21.93£16.91
£265£24.58£44.70£34.47
£485£44.98£81.80£63.09

Paying Home Insurance with a Credit Card

If you don't have the money to pay your annual premium all at once, using a credit card to make the upfront payment can be more economical than asking the insurer to break your premium into monthly payments. Usually, both the insurer and the credit card will charge you interest—it's a matter of deciding which will cost less.

Broadly speaking, you can compare the APR on your existing credit cards to the APR from your insurer. If you have a credit card with a lower APR than the APR your insurer will charge, you may be better off using your credit card to pay the insurer in one upfront, annual payment.

The average credit card APR is 18.9% for those with good credit. If your card has a similar APR, most people will save money on monthly payments if done so via your credit card vs. most insurers.

Poor Credit?

Those with poor credit may be paying around 36% on their credit cards. If this is the case for you, you will probably incur lower interest charges by arranging monthly payments through your insurer instead of using your credit card.

Using 0% Credit Card Deals to Pay Insurance

0% credit card intro rates may save you a bundle on interest payments, but there are drawbacks to this route. First, those considering opening a brand new credit card for the sole purpose of paying insurance should carefully consider if that is the best/only option, because each new credit card approval is contingent upon a hard credit search, which leaves a mark on your credit record.

Second, if you chose to pay insurance on a 0% credit card, remember to always, always make monthly payments on time. Miss a payment and you'll lose your 0% intro rate. Depending on the card your interest rate could increase well above that which the insurer would have charged.

Conclusion

All in all, pay annually if you can afford the upfront payment—in most cases you'll save money. If you can't afford an upfront payment, remember to look out for the APR charged by an insurer on monthly payments.

Use this information to know if you're being charged a high APR (e.g., Tesco quoted us a higher-than-average APR of 29.8%). You may even find a 0% APR offer (at the time of writing, Hiscox and First Direct offered us 0% APR on monthly payments) however there is much more to an insurance quote than just the APR. The market is constantly changing and we did not survey all UK insurers, but please keep the APR in mind when comparing insurance quotes, as it will affect your payments.

The insurers surveyed for the purposes of this article were: Tesco, Hiscox, John Lewis, Admiral, First Direct, Aviva, Churchill, LV=, Post Office and Direct Line.

Cheap Home Insurance in Your Area

Quickly compare over 3 dozen UK insurance providers. Only one form to fill out.

{"applyCallToAction":"Get Quotes","defaultSelectedItem":"home","description":"Quickly compare over 3 dozen UK insurance providers. Only one form to fill out.","formType":"Insurance","onCurrent":true,"options":[{"label":"Car Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fcar%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"car"},{"label":"Home Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fhome%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"home"},{"label":"Motorbike Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=http%3A%2F%2Fnimblefins.quotezone.co.uk%2Fbike%2Findex.php%3Fid%3D76f4ecd6e1ca7c2f442633593566fdaa","value":"motorbike"},{"label":"Pet Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=https%3A%2F%2Fwww.comparecover.com%2Fxml%2Faffiliate.cfm%3Faffiliate%3Dnimblefins%26affiliatenumber%3D223%26type%3Dpet","value":"pet"},{"label":"Travel Insurance","url":"https:\/\/www.nimblefins.co.uk\/redirect?link=https%3A%2F%2Fwww.comparecover.com%2Fxml%2Faffiliate.cfm%3Faffiliate%3Dnimblefins%26affiliatenumber%3D223%26type%3Dtravel","value":"travel"}],"title":"Cheap Home Insurance in Your Area"}

Comments and Questions