Your MONEY: Paying Insurance Monthly is Worst Policy ; CASHPOINT

By John Husband

FIRMS are fleecing customers who pay car and home insurance policies monthly out of pounds 2billion a year.

The car insurer charges an average of 22.7 per cent interest, a survey by MoneyExpert.com reveals. That adds more than pounds 90 to the typical pounds 806 motor policy. The survey found that 11 out of 12 car insurers are charging interest for monthly payment.

Another report by Abbey shows that nearly half its rival home insurers charge an average 19 per cent for monthly payment, adding pounds 34 to the typical pounds 356 home and contents policy. Paying for insurance is a big outlay for most people, so it's tempting to spread the cost.

But, if you don't have the readies when these bills are due the simplest way to meet them is to put them on your credit card. That's much cheaper than taking credit from insurers - especially if you can pay them off in a few months.

But if you need to spread the cost over a year that typically will cost you around 16 per cent.

It would be cheaper getting an authorised overdraft or personal loan from your bank.

Better still, try to get ahead of yourself by setting up a regular monthly savings account to meet all your lumpy yearly or periodic bills. That way you'll be earning interest instead of losing it.

(c) 2007 Daily Mirror. Provided by ProQuest Information and Learning. All rights Reserved.