Intrest Free Monthly Payments For Home Insurance

Vindiesel

the reason some companies make an interest charge for paying monthly is that effectively they are lending you the money to pay for the insurance, and you are paying them back.

Just imagine for a minute that you had the money to pay for the premium, but you took an interest free option to pay monthly. You could put your money in a bank account, and earn interest on the decreasing balance, taking the money out month by month to pay your premiums!

Alternatively, you could pay your premium outright on a credit card. If it was on an interest free promo, it's interest free. If you have a standard interest rate on your card, you pay interest- for exactly the same reason. The credit card/insurance company is lending you the money to pay for the premium. Therefore it is justified in charging you interest.

PS That is the reason. However it is not neccasarilly my opinion!

V

regularsaver1

But you are not covered for 5 months time until you pay are you?

so with home insurance if i pay monthly i am covering at that time. they are not lending me

ArchieB_2

Except 99% of policies are annual contracts and not monthly renewable contracts. The premium is worked out on the annual risk, if it was worked out on a monthly risk then the premiums would be much higher.

They are lending you the annual premium, they aren't insuring you monthly.

regularsaver1

so say i take home insurance with halifax - they quote me monthly. they also tell me the annual premium - x 12 of the monthly.

under FSA have a right to change to somewhere else if it fits me needs. I can cancel month 6 if i want. they arn't going to ask me to pay the other 6 months - unless i've made a claim

so if i was only with them 6 months then they insured me monthly ?

(I would not leave them. purely fiction)

Vindiesel

not quite..nearly all contracts are on a 12 month basis- when you purchase you state your (implied) intention that you will have the policy for a year (12 months). If you cancel after 6, that is your perogative. You have obviously only been insured for 6, but you purchased a 12 month contract. Just because you haven't paid yet, does not mean you haven't bought it. The intention to pay is the requirement..hence the contract for 12 months rather than one on a monthly basis.

ArchieB_2

Plus the charges they may make which may mean you effectively pay for 7 months but are only covered for 6 in the example you give.