Paying insurance premiums by direct debit costs UK policyholders an extra GBP2.7 billion a year, according to research from MoneyExpert.com.
Research from MoneyExpert.com shows that 19.5 million home insurance policyholders and 18.5 million car insurance policyholders choose direct debit to pay for their cover. However, many insurance companies consider spreading the cost over time a loan and charge interest on the payments.
MoneyExpert.com found rates as high as 37% APR for motor policies, and 35% APR for home contents cover. Spreading the cost of an annual premium over the year may wipe out any savings the consumer made from shopping around for a low-cost policy.