Since the credit crunch and subsequent recession of 2008 everyone has 'felt the pinch' with the high unemployment, slow or little growth and inflation, leading to a restriction in the supply of money and cashflow problems.
Having to pay out large annual recurring fees has had a crippling effect upon many households on low or fixed incomes. So it is with insurance premiums, whether it is for a car, home or business, the insurance fees are usually demanded in one annual lump sum.
This had led to many people under-insuring or cancelling covers to try to make cost savings. In the most extreme cases this has led to an increase in the number of uninsured drivers on the roads and homes and properties without adequate cover. Similarly, cashflow has become a major problem for many small business and paying for the years cover in advance is not possible for many.
Everyone is looking for cheaper insurance and one way to stretch limited disposable income is to spread the payments for cover where possible.
Many personal lines and business insurance companies are now offering more flexible monthly premium payment plans.
Insurance by its very nature demands that for the contract to be in force and valid, the consideration for the contract in the form of money as a premium, must be received before the cover period for the contract starts.
With Insurance policies there is no credit. The money must be received before the event for cover to be effective.
Monthly payment plans work because they allow the insured to cover themselves on a recurring temporary basis, even where the contract in force is annual. A flexible payment plan allows the insured to retain the bulk of the premium and effectively earn interest on the amount unpaid. It is also easier to cancel the policy.
Many insurance companies do not like to offer flexible payment plans or staggered payments because it costs them money. When a policy holder pays the total premium 'up front', that money and all the other premiums collected, is put into investment funds that earn interest for the insurance company.
Many people assume that insurance companies make profit from the difference between premiums collected and claims paid out. It is this interest earned from the premium fund that is an insurance company's largest source of profit, earning money on money.
Payment plans therefore come at a price, usually with an interest rate that is a lot higher than the current standard APR, to allow for administration costs.
It is important to compare rates charged when looking for coverage as well as premiums, as these hidden costs can make what at first appeared to be a cheap proposition, a much more expensive option over time.
Finding Payment Plan Suppliers
So how do you establish if a company is offering flexible payments?
To save a lot of wasted time it is necessary to check whether an insurance company is offering payment plans, early in the buying process, before getting a quote.
If using the telephone to a broker or a direct insurer, ask early in the conversation whether such plans exist.
If using the Internet, look for companies displaying the Direct Debit mark in the form of overlapping twin D's. All insurance companies collect monthly payments by direct debit and this is a firm indication that a website offers these facilities.
Use search engines to narrow down the specific type of insurance required and add keywords to the search terms such as 'payment plan' or 'monthly payments'.
If using a price comparison engine, do not assume that all the companies quoting allow for payment plans, however most of the large ones will allow you to compare covers which usually provides this information.
On a cautionary note, if you have found a policy you are happy with and an insurance company that offers flexible payments, be sure to read the small print carefully. Many an individual or company has had their insurance immediately cancelled because of problems with missed direct debit payments and banks.
Public Liability Insurance: Often Neglected But Very Essential Aspect of Every Small Business A Guide to Getting the Best Business Liability Insurance Quote Residential Landlord Insurance Commercial Insurance Quotes Online Pitfalls Maximize Business Coverage By Finding The Right Provider Policy Declaration Page Address
0 comments:
Post a Comment