What Is Monthly Car Insurance And Who Is It Helpful For?
Last Modified 16th of February 2021
Monthly car insurance is a relatively new option on the insurance market and it falls somewhere between temporary insurance and regular car insurance in terms of how it works and what it is useful for. The principal is that you get an insurance quote as you normally would, by putting in your details, car, named drivers (if any) and even additional cars in some cases, but rather than getting a quote for an annual policy you get a quote for a policy which will last 1 month. By taking out the policy you will be covered for a month, after which you can renew and so on. The original quote is generally good for 8 months’ worth of renewals, so you don’t have to re-enter your details every month. You pay in full for a month’s insurance at the start of that month and at the end of the month you can cancel your policy with no penalty and no further premium to pay. If you do end up keeping your policy for 8 months it will naturally end, but you can get a new quote and take it on for another 1 to 8 months if you wish. What Are The Advantages? One obvious advantage of monthly insurance is that you can use it if you only drive for a few months of the year (this is common for students who drive during holiday time) or if you are borrowing an additional car temporarily perhaps. With traditional insurance, when you pay monthly you are actually borrowing the money to pay for your policy and paying it back on credit and unfortunately insurance companies tend to charge you interest on that credit. With monthly insurance you pay for the full 1 month policy in full at the start of the month, so you never have to pay interest on your insurance premiums and if your details change you don’t have to be worried about being tied to that insurer either, just cancel the policy and get a new quote from whoever you like. One other advantage is that since you don’t need to borrow money to pay the premium, you don’t need a credit rating. For most people this isn’t a problem, but if you have ccjs or defaults against you might find you can’t pay your insurance monthly with a traditional insurer. Are There Any Disadvantages? Well certainly one down side is that you can’t build your no-claims bonus whilst you are using monthly car insurance, simply because the longest a policy can last is 8 months. This means that your ability to build up an NCD and hence get better quotes in the future is diminished. If you are only using your car very occasionally this downside might not matter too much, but if you use your car for 8 months of the year and particularly if you are a young driver, the value of earning a year’s no claims might make a full annual policy worthwhile even if it costs more. Another disadvantage is simply cost – because monthly insurance is similar to temporary insurance you will probably find your premiums are higher per month than the effective monthly cost of an annual policy. It might even be more expensive than the monthly premiums you would pay on an annual policy (interest and all). Obviously these costs need to weighed up and the decision really depends on how much you expect to use your car. You should also consider the cost of taking out an annual policy and simply cancelling it when you no longer need it. Most insurers will refund you pro rata if you cancel, but only after charging you an admin fee of around £50 – if you know roughly how long you need insuring for this could work out the cheaper option over a few months. What Else Is Monthly Car Insurance Useful For? One more useful thing is that monthly car insurance can be used to get your car out of police compounds. Thanks to new legislation you are required to have continuous insurance on your vehicle unless it is SORN and it is all too easy to forget which can lead to your car being taken. If you are in this spot a monthly policy should be sufficient to get your car back, after which you can cancel the policy and immediately declare the vehicle SORN!
