Avoid using Premium Credit to pay for anything.

Blanquette

This was a real shocker. I got a quote of £350 from Home Protect, and was asked if I would like to pay by Direct Debit. I have always seen Direct Debit as a good way to pay for things. The person at the end of the line told me it would be 12 payments of £38. I just assumed this added up to the quote. I stupidly didn't do the maths. A few days later I received a lot of bumf from a company called Premium Credit, telling me I should sign & return immediately to start payments for Home Protect or pay a surcharge of £10.
It was only when I waded through the pages that I spotted an extra charge would be applied for using the DD facility. An extra charge of £110!!!! I rang and cancelled the DD and paid the full amount up front. How can this be legal? Who is this shark company Premium Credit?

nidO

I'm not sure why you're complaining about Premium Credit here, the fault (if any) in this situation lies with Home Protect not explaining their charging to you clearly, assuming they didn't.

1) Insurance for things like houses/cars generally aren't provided on monthly policies, they're annual.
This means that if you:
2) Choose to pay your insurance monthly rather than annually
you are;
3) Entering into a credit agreement for your insurance cost
which means that
4) You will often be paying back a credit provider, who will be charging you the premium cost, plus interest, plus, often, fees.

Edit: Assuming you weren't given the info over the phone, here's Home Protect's easy-to-find info about paying by monthly direct debit on their site:

http://www.homeprotect.co.uk/Media/307025/homeprotect-precontractual-explanations.pdf?searchkeywords=home%2bprotect

This very nicely explains that you are taking out a credit agreement to finance the payment of your insurance when paying it by direct debit.

InsideInsurance

Insurance is, almost exclusively, an annual policy. Most insurers/ brokers offer the option of spreading the cost by effectively taking out a loan for the premiums due.

The bigger plays can self finance this, the smaller brokers normally use a credit provider like Premium Credit as whilst you are paying monthly the broker has to the pay the insurer up front.

Naturally if they are giving you a loan the majority of companies charge interest on it. If they dont charge interest they will make a big thing about it being 0% APR

Interest rates charged by insurers tend to be blanketed so cover prime and sub prime so rarely good value if you are a prime debtor. Direct Line for example currently charge an APR of approx 24%

Blanquette

Yes, I should have read the small print..but I have never come across a surcharge to allow payment by direct debit..let alone a surcharge of 30%..that is madness. they try and catch you out.

InsideInsurance

Blanquette wrote: »

Yes, I should have read the small print..but I have never come across a surcharge to allow payment by direct debit..let alone a surcharge of 30%..that is madness. they try and catch you out.

Sounds more like you have never read the small print before. APRs are almost always mid 20s to 30% for paying by installments other than the occasional promotional 0% APR but they then make a song and dance about it.

Who was your broker/ insurer last year?

Blanquette

Yep, I know nothing of APRs..it was to insure my son's house. I live in France and just get an annual bill and send of a cheque. This APR thing sounds like something to be avoided.

pelirocco

You are in effect getting a loan to pay the premium , hence interest charges

InsideInsurance

Blanquette wrote: »

Yep, I know nothing of APRs..it was to insure my son's house. I live in France and just get an annual bill and send of a cheque. This APR thing sounds like something to be avoided.

APR is just a common term across all lending and has a set way of calculating it (the cost of borrowing £1,200 for 12 months including both interest charged and any fees payable). The idea is that it makes it easier for the consumer to compare credit, in particular when trying to compare interest only -v- fee + interest or those giving a compound annual interest rate -v- a monthly etc.

All lenders must display their APR for credit

Insurers are not lenders and premium interest is a secondary income for them. Unless they are doing 0% promotions then almost certainly its better to pay it in full either with your own money or a lower APR credit card.

NVRAM

Typically with any premium there will be additional charges for paying monthly, essentially it's credit.

Always pay insurance in lump sums or alternatively on a 0% on purchases card