Annual Premium
In car insurance and also household insurance, premiums are usually payable monthly in advance. The monthly premium is due on the first of each calendar month. Some Insurance companies offer Annual Premiums – in this case you will pay for a full year’s insurance in advance. The annual premium will meet the contractual liability of the insured and keep the policy in full force for the period of a year.
One of the benefits of an annual premium over a monthly premium is that once you have paid, you do not have to worry about paying insurance again for another year. However, not many people can afford the lump sum payment required for an annual insurance premium. Another benefit is that an annual premium will be offered to you at a reduced rate, you therefore save on the overall amount of insurance.
An interesting case was brought before the short-term insurance ombudsman where an insured person paid an annual premium on his car insurance. After six month the car was written off as a total loss and the insured claimed back six months insurance premiums from the insurance company. The insurer maintained that they had agreed to hold the car covered for a specific period and that the time of the loss was irrelevant. The ombudsman upheld the insurer’s view and agreed that no refund was due in this case.