Can I save money by paying for home insurance annually?

You can often choose to pay for your home insurance each month or pay for the whole year upfront. We explain which option can work out best for you.

You can often choose to pay for your home insurance each month or pay for the whole year upfront. We explain which option can work out best for you.

Rachel Lacey
Insurance and money expert
4
minute read
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Last Updated 22 SEPTEMBER 2022

Paying home insurance annually 

When you pay for your home insurance annually, you’ll make a single one-off payment when the policy starts. This is usually the cheapest way to pay for your home insurance. If you choose to pay monthly, an interest charge will normally be added. Another benefit of paying for your home insurance in one go is that you won’t have to worry about making monthly payments on time.

Paying home insurance monthly 

When you pay your home insurance monthly, you’ll be asked to pay for one or two months’ cover up front. The remainder will then be paid in monthly instalments throughout the year.

But as your insurance provider has effectively given you a loan to pay for your policy, interest will usually be added to your monthly repayments.

Before it agrees to let you pay for your insurance monthly, your insurance provider will run a credit check on you. If your credit score is poor, you may be charged a higher rate of interest.

Although you’ll likely pay more for your home insurance overall if you pay monthly, you won’t have the worry about finding the money for a larger one-off payment.

What is the price difference between paying annually and paying monthly? 

This will come down to the rate of interest you’re charged for spreading the cost. Typically, interest is likely to be around 6%.

Is it better to pay annually? 

You should pay for your home insurance annually if you can manage it, because it will probably work out cheaper overall. Even though you’ll have to shell out more upfront, you’ll be spared unnecessary interest charges.

If you can’t afford to pay for your home insurance annually, you might be able to save some money by putting it on your credit card. You will only save money if the rate of interest charged on your credit card is lower than the interest charged by your insurance provider. It can work out well if you have a credit card that offers 0% on new purchases. You need to make sure that you repay the cost of the annual premium before the 0% rate ends to benefit from any saving.

Of course, paying for insurance monthly is better than not buying home insurance at all. If there was a flood or fire and your home wasn’t insured, the financial consequences could be devastating.

How else can I save money on my home insurance? 

Get the right level of cover

Make sure you’re only paying for the cover you need. Ensure you value your home contents accurately and that your rebuild cost for buildings insurance is correct. 

If you’re overinsured, you’ll end up paying more for your insurance than necessary.  

However, it’s important to be careful. If you’re underinsured and you need to claim, you won’t get the full pay-out.   

Shop around

Rather than letting your home insurance policy auto-renew, it’s well worth shopping around a few weeks before your policy end date to see if there’s a better offer out there. We can do the legwork for you when you sign up to  Automated Quotes.

Increase your voluntary excess 

You can reduce your premiums by choosing to pay  a higher voluntary excess on your policy. This will mean you have to pay more towards the cost of any claim, so be sure you can afford to pay it before you agree. 

Boost your security

Having high-quality locks on your doors and windows, and installing a security system and smoke alarm, could make your home insurance cheaper. 

Combine policies

You could find it cheaper to get both your buildings insurance and contents insurance from one provider, if you don’t already. 

The pros and cons of paying for home insurance annually 

Paying for your insurance annually, as opposed to monthly, has pros and cons, so you should consider whether it’s suitable for you. 

Pros:

  • It’s cheaper – paying for home insurance in one lump sum is typically cheaper than paying through monthly instalments. Insurance providers often charge interest on monthly payments, so you’ll pay back a little more than if you paid upfront.
  • You’ll have more choice – not all insurance providers allow customers to pay monthly (although most do), so by choosing to pay your home insurance annually you might get to pick from more deals.
  • It’s more convenient – if you pay for your home insurance annually, you’ll make one payment and that’s it for the year.  

Cons: 

  • Depending on your finances, you may struggle to pay for your home insurance with one lump sum.

The pros and cons of paying for home insurance monthly 

While paying monthly can be more expensive, it can have some advantages too. 

Pros:

  • You can spread the cost of insurance over manageable payments.
  • Household budgeting can be easier as you can add the amount to your monthly outgoings.
  • There are a few insurance providers that offer a monthly payment option for no extra charge (0% interest). 

Cons:

  • You could pay an expensive rate of interest.
  • Your policy will be cancelled if you don’t keep up your payments.
  • You’ll have more admin to deal with. 

Comparing home insurance

Whether you think you want to pay for your home insurance annually or monthly, it’s always a good idea to compare prices. It’s simple with Comparethemarket – compare home insurance now.

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