You’d expect that certain bills will cost the same no matter if you pay them monthly, quarterly or even annually. Yet the latest Compare the Market research has found that there are instances where people may be forking out more for the same service by paying monthly. Across three different car models, Compare the Market found that five out of the seven car insurers had an increased ‘total amount’ when paying for the premium monthly, as opposed to paying the 12-month policy upfront.
The car insurance comparison site also found that, in one instance, some insurance policies cost 20.8% more if people were paying their premium monthly as opposed to paying annually for the same insurance policy.
These additional costs could be due to various causes, including but not limited to insurers charging administration fees for opting to spread the payments out monthly. However, consumers should note that no one-size-fits-all model exists across the insurance sector. Each individual insurer is able to set this extra fee as they see fit, or none at all.
Commenting on the findings, Compare the Market’s Executive General Manager for General Insurance and car insurance expert, Adrian Taylor said that people shouldn’t be lulled into complacency and be on the lookout for this added “convenience tax”, or extra fees for alternate options, when they’re planning their household budget.
“It might seem easier to fit car insurance payments into an already tight household budget by paying for it monthly, or even fortnightly, where available, but they may end up paying more than they need to,” Mr Taylor said.
“In a single instance, our research showed that people could be slogged up to 20% more for their total premiums by paying monthly than if they were paying their insurance premiums annually, but understandable, not everyone is able to pay a year’s worth of insurance upfront.”
| 2024 Toyota Corolla Ascent Sport Auto | 2024 BYD Seal Dynamic Auto | 2024 Mazda CX-5 G20 Maxx KF Series Auto FWD | ||||
| Biggest increase on annual premium | Insurer B | 20.8% | Insurer B | 20.5% | Insurer B | 20.8% |
| Insurer A | 15.9% | Insurer E | 15.4% | Insurer E | 15.6% | |
| Insurer E | 15.6% | Insurer A | 15.2% | Insurer A | 15.5% | |
| Insurer G | 11.2% | Insurer G | 11.2% | Insurer G | 11.2% | |
| Insurer F | 4.4% | Insurer F | 4.5% | Insurer F | 4.2% | |
| Insurer C | 0.0% | Insurer C | 0.0% | Insurer C | 0.0% | |
| Smallest increase on annual premium | Insurer D | 0.0% | Insurer D | 0.0% | Insurer D | 0.0% |
*Based on Compare the Market research. Prices are current as of 28 August 2024, and are subject to change. Full methodology can be found below.
Switching car insurance payments from monthly to annually could save people up to a few hundred dollars, but that’s not the only way to cut the cost of insurance premiums, according to Mr Taylor.
“While it’s not possible for everyone, people should check to see if their household budget allows them to pay the premium upfront for the year, as in most cases, you’ll pay less this way than if you were to pay for the same policy monthly,” Mr Taylor said.
“However, this is not the only way to reduce your car insurance premium. It’s really worth taking a look at your car insurance policy every year when the renewal comes around and see if your circumstances still match what you’re paying. We know that a lot can happen in a year, so if your circumstances change, so should your policy.
“Another way you could also reduce your car insurance premiums is by increasing your policy excess. While increasing the excess on your car insurance can lead to lower premiums, it’s a decision that requires careful consideration as you’ll need to contribute more if you suffer a loss and need to claim.
“We’ve also heard of people who forget to remove their adult children as the drivers of their car from their policy after they move out, which may keep their annual premiums higher than they should be. So, it’s worth checking to see if you have any children still on your policy as an additional driver. Also, if no young adults will drive your car you could add an age limit which could also lower your insurance premium.
“There are also new policy options out there in the market, with low kilometre policies for those people who don’t use their car often. Choosing to go with a low kilometre or safe driver policy may be a cheaper option for people who fit these criteria.”
There are so many different gears people could shift into regarding their insurance policy, which is why Compare the Market would advise people to compare their options and get a policy that suits their needs the most.
*Methodology
Compare the Market looked at car insurance quotes for three different classed vehicles, a 2024 Toyota Corolla Ascent Sport Auto, 2024 BYD Seal Dynamic Auto and 2024 Mazda CX-5 G20 Maxx KF Series Auto FWD, from seven different insurers, and underwriters, and compared the annual quoted car insurance price, with the total of monthly repayments across 12 months on the 28th August 2024.
All quotes were generated for a 30-year-old woman who lives in Springhill, Qld, 4000, has no finance on the car, no other car, and owns her own home. She has had no prior claims or accidents and a 30-year and older restriction on her policy. The car(s) has no factory options, modifications, non-standard accessories, and no existing damage. The vehicle is used for private use only and commuting to work, and is parked in the garage at night. The car travels up to 15,000 km in a year.
Quoted prices are inclusive of all discounts offered by each individual insurer and are subject to change.
-ENDS-
For interviews and more information, please contact:
Noémi Hadnagy | m: 0433 377 252 | e: [email protected]
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