Can I save money by paying for home insurance annually?

When comparing your home insurance costs, you’ll typically be given two payment options – pay the whole amount up front or spread the payment over monthly instalments. But which is better value?

When comparing your home insurance costs, you’ll typically be given two payment options – pay the whole amount up front or spread the payment over monthly instalments. But which is better value?

Chris King
Head of Home Insurance
4
minute read
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Posted 18 FEBRUARY 2020 Last Updated 8 APRIL 2022

Paying home insurance annually 

When you pay your home insurance annually, you’ll make a single one-off payment. This is typically the cheapest way of getting home insurance, as you won’t have to pay interest on monthly payments. Plus, 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 make either one or two months’ payment up front, then the remainder of what you owe will be spread over instalments for the rest of the year. 

You’ll typically be charged interest on your payments as, effectively, the provider is giving you a loan to pay for your insurance. Because of this, the provider will carry out a credit check on you. If your credit score is poor, you may be charged a higher rate of interest.

Just be aware that if you want to pay monthly, you might have fewer providers to choose from. Most – but not all providers – offer the option of paying monthly, so you could miss out on the best deals. However, paying monthly means you don’t have to find the money for a large one-off payment.

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

The price difference between paying for your home insurance annually rather than monthly will be based on the amount of interest charged on the monthly payments.

Is it better to pay annually? 

It depends entirely on your situation and whether you can afford to pay your premium in one lump sum. 

If paying annually isn’t feasible for you, using a credit card to pay for your home insurance might be cheaper than monthly payments – provided the APR on the credit card is lower than the one offered by the home insurance provider. 

If you choose to pay monthly, that’s a better option than not getting home insurance at all. Imagine if there was a flood or fire and your home wasn’t covered – the financial impact of not being insured could be devastating.

How else can I save money on my home insurance? 

Get the right level of cover
Make sure you’re paying for the cover you need. If you’re underinsured and you need to claim, you won’t get the full pay-out. If, on the other hand, you’re over-insured, you’ll be paying more than you need to.

Ensure you value your home contents accurately and that your rebuild cost for buildings insurance is correct.

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 opt to pay more towards the cost of a claim by choosing a higher voluntary excess on your policy. But be sure you can afford to pay your contribution if you do make a claim.

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: 

  • Save money – 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.
  • 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.
  • Enjoy more convenience – if you pay for your home insurance annually, you’ll make one payment and that’s it for the year. 

Cons: 

  • Upfront payment – you’ll need to pay a lump sum for the year and you might not have the spare cash.

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 Compare the Market – compare home insurance now.

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