Why monthly can cost more
When you pay an annual premium in monthly instalments, the insurer or a finance company is often lending you the money. You’ll see an APR and a total amount payable in your documents. Compare that total with the single-payment price to see the true cost of spreading.
What the FCA found
The FCA’s premium finance market study covered home and motor insurance. Its final report in February 2026 found the cost of premium finance had fallen since 2022 and decided not to introduce a price cap or require interest-free instalments. It said it would keep monitoring APRs and use its Consumer Duty rules on fair value, and that any higher premium for monthly payers needs an objective, reasonable basis.
When monthly makes sense
- If you couldn’t afford the annual amount without borrowing at a higher rate elsewhere.
- If the insurer offers 0% instalments (some do).
- For policies that are genuinely monthly contracts, such as some life insurance, where there’s no credit involved.
If paying annually is possible, it’s often the cheaper choice for car and home insurance.
Last updated: 24 September 2026
