Monthly cover is an car insurance rip off

Thu, 20 Oct 2005

New research has found that motorists who choose to spread the cost of their car insurance premium over the year are in fact locked into expensive credit deals.

The interest charges levied against motorists who pay by monthly direct debits are up to 20 per cent higher than most credit card rates.

Analysts, Defaqto showed that customers who chose to pay by direct debit are being subjected to a 35 per cent charge on top of the premium by some insurance companies.

Brian Brown, Defaqto spokesman said, "In an era when many people pay for household bills each month using direct debits or standing orders, it makes sense for household budgeting to pay insurance premiums on a similar basis. But policyholders should consider carefully just how much this costs them.

"We would question why customers are encouraged to use these schemes. Many would be better off paying by credit card and clearing the debt from there rather than using insurers’ plans."

According to Defaqto only one in ten motor insurance companies charged under 15 per cent in interest charges for monthly payments.

They said insurers were boosting their profits by removing clauses such as ‘driving other cars,’ which previously allowed drivers to use other cars in an emergency.

However, Direct Line said they would not be excluding this clause from its policies.
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