Juggling the household budget can be hard enough but being hit with a big bill every few months can make life uncomfortable for a period of time while you scrape together the cash. More and more people are looking to pay their big bills in smaller chunks over the course of the year, and one way to do that is pay-by-the-month insurance.
Pay-by-the-month insurance is a system that allows insurance premium payments to be made in twelve equal amounts – one each month – instead of the traditional method of one lump sum each year. This can make insurance more practical and easy to manage for people on a tight budget, because the individual payments are much smaller.
How to pay-by-the-month
Often, the insurer will arrange to have the monthly instalments automatically withdrawn from a person’s bank account. Insurers sometimes charge extra fees for the privilege of paying monthly. However, not all insurance companies charge a fee, so shopping around can result in a policy that is easier to manage, that allows you to keep the household budget balanced, and with no extra charges.
Pay-by-the-month vs upfront payments
- Premiums for pay-by-the-month insurance are charged monthly, meaning the individual payments are smaller and easier to budget for.
- Many insurers charge a fee to pay-by-the-month. This means that while the individual payments may be smaller, the total amount paid to the company is larger than if the insurer had been paid in a lump sum up front.
- Insurers sometimes arrange to have the monthly payment withdrawn automatically from a person’s bank account. If there is not enough money in the account at the time, the bank may charge extra fees (and your bank may also charge you an honour fee).
- Some types of insurance aren’t offered as pay-by-the-month policies, and some insurers don’t offer pay-by-the-month as an option. This can restrict the choice of insurers.
Insurance payment restrictions
Since pay-by-the-month insurance premiums are paid more frequently, missed payments can affect your coverage. Some insurers will not continue to honour the insurance policy if two monthly payments are missed. Even once the payments have been made, the conditions attached to the policy can change. It pays to always be aware of the conditions of the policy taken out and be sure not to miss your due dates.