The cost of convenience

Paying for home contents insurance by Direct Debit is costing customers as much as £290 million according to new research from Abbey Home Insurance. Around 9.3 million people pay for their home insurance by Direct Debit and many may not realise that they could be charged for doing this.

Of the 215 home contents policies on the market, 94 (44 per cent) charge interest to customers paying by Direct Debit. The average APR on these charges is 19.16 per cent with the highest being a massive 34.9 per cent. With the Association of British Insurers (ABI) quoting the average annual premium for contents insurance as £160 a year, customers paying by direct debit are paying on average an additional £31 a year, with some customers potentially paying as much as £55 extra a year.

Prasad Shastri, Head of Insurance Marketing at Abbey said: “Using Direct Debit to buy home insurance is not a service you should be paying for. There is no point using a competitively priced insurer if they then go and add to your annual bill using back-door methods. Customers should carefully look to avoid insurers that levy an additional fee for paying premiums over the course of the year.”

Abbey offers unlimited sum insured (Peace of Mind) and specified sum insured (Essentials) home insurance policies. Cover is subject to terms and conditions, restrictions and exclusions. Full details are in the policy document, which is available on request. Individual limits apply to certain areas of cover.

Abbey is offers the following tips when looking for good home insurance:

Buying your home insurance based on the price alone may leave you underinsured.

Make sure you check that as well as a competitive price, you are receiving the appropriate amount of cover for your home and its contents.

Be aware of policies that charge extra for paying by Direct Debit. Unlike Abbey, some insurers penalise you for paying your insurance premiums by Direct Debit, some charge as much as 34.9 per cent APR.

Look for policies that have been given a five star rating by Defaqto, a leading independent research company. This signifies that a policy has some of the best quality cover available in the market.