When you take out some types of insurance you will have the choice of paying it in one yearly lump sum or in monthly instalments. There are many reasons for doing each of these and you need to decide which you think will work best for you.
In most cases the monthly instalments will be a more expensive option or repaying your mortgage. You will find that they charge interest to the monthly payments so if you go for the lump sum option you will not have to pay this extra. However, there will be some where there is nothing extra to pay if you pay it monthly compared to paying it yearly.
If monthly and yearly payments are the same overall then it could be wise to pay it monthly. This is because it will be easier for you to manage your money and you will be able to pay it as you get paid rather than having to find it all at once. If you have the money available, then it will be better to keep it in a savings account and earn the interest rather than pay it all to the insurance company in a lump sum. As long as you are confident that you will not spend it and that you will still have enough to pay the monthly instalments then this can work out well.
Normally monthly instalments are dearer than paying in a lump sum. In this case it is worth calculating how much extra you will have to pay if you pay in instalments and this will allow you to decide whether you think that it is worth it or not. If you do have the money available, you can calculate how much money you would make if you kept it in a savings account compared to how much you would save if you paid the insurance in a lump sum. You will then be able to work out which will give you the best deal financially.
There will be a lot of people who cannot afford to pay the insurance in a lump sum and so will have no choice but to pay it monthly. It may feel that you are then in a situation where you will have no choice, but there are some options you could look at which might help you to make things cheaper. Insurance companies do vary a lot in how much they charge and so if you can find one that is cheaper this will help you to save some money. You can compare the prices of different companies online. You will find that there are comparison websites where you can compare a number of companies. Although these are useful, they tend to only compare companies that give them commission and will only have a selected few. Some companies can only be dealt with directly and some go through brokers so it is worth doing quite a bit of research so that you can check whether you can save a significant amount of money.
So although it may just seem that paying a lump sum will be better there are circumstances where it may not be. Make sure that you compare prices first and find the insurance that offers the best value for you. Look at how much it will cost to pay monthly compared to in a lump sum and see whether there are any companies that offer monthly payments free of interest still at a competitive rate. Also decide whether paying the lump sum really is the best option for you as this will depend on what else you might be doing with the money and whether that will give you a better return. There is a lot to think about, it is not necessarily as simple as it seems and it will also depend on