Are you being charged a fortune in interest on your insurance?
Buying insurance cover for your vehicle is already an expensive affair, and whilst there are different levels of insurance cover to cater for different needs and pockets there is no doubt that the cost of vehicle insurance cover overall has been rising for a number of different reasons, including the heightened level of insurance fraud in the current climate, which unfortunately honest drivers usually end up picking up the tab for.
However, it seems that insurance fraudsters may not be the only ones that are committing daylight robbery on honest drivers, as evidence suggests that many insurance firms themselves are fleecing drivers dry at a time when money is already an issue for most.
One of the ways in which some insurance firms are doing this is by charging customers a fortune for the privilege of making their premium payments on a monthly basis via direct debit.
Over the years many drivers have opted to pay their vehicle insurance premiums on a monthly basis by direct debit, as this makes the cost of cover more affordable rather than having to find hundreds of pounds in one lump sum. However, some drivers may find that insurance firms are now charging up to a whopping 40 percent in interest simply for the privilege of making payments in this way.
Insurance premiums are said to be increasing at their fastest pace in over ten years, and with some insurance firms applying such punishing interest rates to those that are already too cash strapped to make a lump sum payment the cost of cover can soar sky high.
According to a recent report from the AA the average cost of fully comprehensive cover has gone up by 11 percent over the past year to around £778, but with the 40 percent interest added this can bump the cost up to a massive £953 a year, adding £175 to the cost of the policy.
Out of the 33 million drivers in the UK it is thought that over thirteen million of them make their payments by monthly direct debit for their vehicle insurance. It is often younger drivers with the highest premiums and the lowest income that tend to pay on a monthly basis, and they are the ones that will therefore be penalised with these additional interest payments because of their inability to pay the premium as a lump sum.
Officials have warned that whilst many people now shop around for their insurance cover in order to get the best price on cover the various interest charges that many insurance firms are charging could make this a waste of time. Someone that thinks that they found the best deal in terms of the cost of cover could end up losing out because of the amount of interest that the provider then charges for paying on a monthly basis.
One official said: ‘With such high charges, drivers could lose all the benefit of shopping around for cheaper cover.’
Another official said: ‘Insurers see direct debit cover as a loan on the cost of an annual policy. If you have an accident in the first month of the cover, they’ll have to pay out without having received your total premium.’
The AA stated that there were now many people that were stopping their direct debits due to the cost and were instead driving around with no insurance at all.
The motoring group said: ‘We are concerned at the number of people who appear to be deliberately stopping their regular payments to save money and driving uninsured.’