Insurance, whether compulsory or optional, can often take up a big chunk of your budget. Perhaps you are organised and save in advance, or maybe you prefer monthly payments to keep your spending more regular. Whichever way you might pay for your insurance premiums, there are a few things you can do to keep the costs low:
- Check if you need insurance
- Compare your insurance quotes
- Choose a suitable payment method
Do you need insurance?
Some insurance you can’t avoid, like car insurance if you drive a car. This is known as compulsory insurance, and it is a legal requirement if you intend to perform activities which require insurance. Optional insurance, on the other hand, is not a legal requirement and you can choose whether to take it out or not – though it is almost always advisable, especially when it comes to travel insurance or breakdown cover.
While some insurance you need, and some you should really just have, there are some cases where it’s not necessary to take out new premiums. The most common cases are if you have a packaged bank account or if you have health insurance through your work, for example. Packaged bank accounts typically come with travel insurance, breakdown cover and mobile phone insurance. Depending on the bank account, the specifics may differ, but often your children’s phones can be covered, and the breakdown policy applies to you (rather than a car) so even if you’re a passenger, you would still receive roadside assistance. You should check what’s included if you have a packaged bank account (or perhaps consider opening one) as it could save you hundreds of pounds a year.
If you have healthcare insurance through your work, this may cover your immediate family members, and children up to the ages of 18 or 21, so you might not need to take out additional healthcare for your family. If you’re not sure, check the documentation your employer provided or ask your human resources department – it’s better to check now than find out later you’ve been paying double!
Comparing insurance
Whether your insurance is up for renewal, or you need a brand new quote altogether, you can almost always find a cheaper quote by spending a few minutes comparing policies. If you were looking to borrow, you would compare loans online, so why not do the same for things like insurance? Comparison sites make it super easy to compare insurance, whether you need car insurance, travel insurance or even just breakdown cover. You need to enter a few personal details and the comparison site does the rest of work, finding insurers that can offer you a quote. Not every insurance provider is listed on every comparison site, so you may need to check a few different ones to ensure you’re looking at your best options, but it normally takes only seconds for your results to be returned. Comparing insurance like this could save you hundreds of pounds over the year – especially compared to renewal quotes. If you find a good quote, make sure you save it so you can access it later in case it turns out to be the cheapest option, but don’t just opt for the lowest cost; make sure the policy covers all of your requirements, otherwise you could end up paying out on top of your insurance if something goes wrong that isn’t covered.
Paying for insurance
When it comes to paying for insurance, there can be a few options available – especially when the insurance is expensive. Travel insurance can range anywhere between a couple of pounds to in the hundreds, depending on how many people you need to cover, where you’re going and what you’re doing. If you’re going skiing, for example, your travel insurance is likely to be much more expensive than if you’re going on a short city break, as there is more risk of accident which means there is a higher chance the insurance provider will need to pay out. Car insurance tends to only be the hundreds, and if you’re a young driver or if you’ve had a couple of incidents (even if they weren’t your fault!), it can be in the thousands.
The best way to pay for an expensive premium is to save up in advance, but this isn’t always possible for every budget – and if you’ve recently had an unexpected cost, you may have had to use your savings for that instead.
Insurance companies tend to offer an instalment plan if you can’t afford the policy up front. They offer to spread the balance over 12 months, usually with a larger initial payment or final payment. There is almost always interest charged for spreading your repayments like this as you are effectively borrowing a loan from the insurance company to pay the premium, which you then repay over the following months. It works out more expensive overall than paying the annual quote in one go, but it's not worth wrecking your finances over if the lump sum payment would place you in financial difficulty (as long as the monthly instalments are affordable too!).
If you think you can repay the amount needed in a few months, then you might consider using instant short term loans because you can settle the debt much more quickly. However, you need to compare the amount of interest you would pay using a third party creditor compared to using the finance option offered by the insurance company. Although it can be a pain having several repayments hanging over you, if you are fairly organised and keen to save money wherever possible, it might be cheaper to spread the policy over the year rather than borrowing from a third party.
One thing to check, when going through the payment process, is whether the card details will be kept for renewal quotes in future. If they will, then you need to look out for your renewal premium or set a reminder to cancel the policy before the direct debit is taken. While you can always withdraw from the agreement within 14 days if you forget to cancel the renewal first, some insurers charge withdrawal fees which means you can still be out of pocket.
Insurance, whether compulsory or optional, can be a budget killer, so make sure you are prepared by saving ahead of the purchase date, setting reminders to adjust your budget, or even just giving yourself ten minutes to look for a cheaper quote.
