Landlord Insurance Pay Monthly

Should Landlords Pay for Insurance Monthly? Weighing the Pros and Cons

Paying for landlord insurance monthly rather than annually is an option many UK insurers offer. While this can improve cash flow, some potential drawbacks need consideration. Evaluating the pros and cons helps decide if monthly premiums suit your situation.

Pros of Monthly Landlord Insurance Payments

• More Affordable Payments – Splitting the annual premium into 12 bite-sized monthly chunks can assist cash flow if money is tight. This is especially helpful for new landlords starting who need to spread costs.
• Matches Rental Income – As rental income tends to arrive monthly, aligning insurance payments can facilitate better financial planning. The regular monthly schedule helps match outgoings to rental incomings.
• Allows Budget Flexibility – Opting for monthly payments enables adjusting budgets if circumstances change. For example, payments could be paused temporarily during void periods with no tenants. An annual premium means you’re locked in for the entire term.
• Access to Higher Cover – Insurers may offer more substantial cover amounts if you pay monthly, as risk is spread over 12 months. The monthly payment can sometimes unlock higher limits for buildings, contents and loss of rent.
• Spreads Cost of Excess Payments – Any excess payments due for claims can also be distributed via monthly premiums. Rather than a significant one-off payment, the cost is absorbed over time. Helpful if your budget is tight when a claim arises.

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Cons of Paying for Landlord Insurance Monthly

• Higher Overall Costs – Monthly payment fees and interest charges mean the total annual cost is 10-15% more than paying annually. This typically equates to over £100 extra per year.
• Risk of Late Fees – Forgotten payments incur ~£20 late fees per missed instalment. Multiple missed payments could even end in policy cancellation, leaving you uninsured.
• Agreement Changes – Adjusting the policy mid-term often necessitates cancelling and creating a new credit agreement – meaning extra fees and paperwork. Fiddly to adjust.
• Direct Debit Issues – Defaulted payments due to insufficient funds can prompt policy cancellation. Insurers will also automatically re-attempt payments, potentially triggering bank charges if funds are unavailable.
• Cancellation Fees – Early termination before the 12-month term is up brings proportional cancellation fees for outstanding monthly payments. This curtails the flexibility to switch insurers.
• Ongoing Credit Checks – Insurers typically perform credit checks before approving monthly payments. Further checks throughout the term can negatively impact credit scores if you apply for additional credit elsewhere.
• Automatic Annual Renewal – Monthly policies often auto-renew annually, so active cancellation is required to avoid continuous payments. Easier to forget to shop around.
• Minimum Term Lengths – Monthly payment options often have a minimum 9-12 months term. This can reduce flexibility if you want to switch insurers sooner than that.
• Reliant on Direct Debits – Monthly premiums typically require setting up a continuous Direct Debit payment authority. Problems can arise if the linked bank account closes.
• Tied to Credit Agreement – Tying into a monthly credit agreement reduces flexibility vs paying for the entire term upfront. Make sure you can sustain the payments long-term.

Key Considerations for Paying Monthly

• Check total annual cost – is the extra 10-15% premium worth it for your situation?
• Watch out for late payment fees, and remember to cancel auto-renewal.
• Be confident you can sustain payments for the full minimum term (usually 12 months).
• Factor in any renewal price increases – will monthly payments remain affordable?
• Consider if an annual lump sum is feasible via savings – this avoids credit agreement.

Monthly payments can assist landlord cash flow and introduce fees and rigid credit agreements. Paying annually is more straightforward and cheaper if funds allow. Evaluate your position and insurance needs before opting for monthly landlord insurance.