A growing number of UK consumers are using credit to pay for insurance policies, with many opting for monthly payment structures amid ongoing financial pressures, according to new research from premium finance provider Premium Credit.
Findings from the firm’s Insurance Index – now in its sixth year – show that 76% of insurance customers used some form of credit to pay for one or more insurance policies, up from 71% in March 2024 and 70% in March 2023.
Of those using credit, 43% said they had borrowed more in the past 12 months compared to the previous year. The estimated average amount borrowed rose to £400, a 32% increase from £302 in 2024. Around 42% of respondents indicated they had not increased their borrowing, 4% reported borrowing less, and 11% either did not know or declined to answer.
The research also showed a continued shift toward monthly insurance payments. Since the beginning of the cost-of-living crisis in 2021, 19% of motorists reported switching to monthly payments, compared to 9% who moved to annual payments.
Last year’s index showed 15% had made the move to monthly and 8% had opted to pay in a lump sum.
A previous study from Premium Credit revealed that nearly three out of four personal lines insurance customers use some form of credit to pay for at least one policy. Half of these customers rely on credit to cover their car insurance.
Among home insurance policyholders, 15% moved to monthly payments over the same period, while 9% switched to annual payments. The previous year’s results showed 11% had made the switch to monthly, with 7% opting out of monthly payments.
The primary reason given for increased borrowing was financial strain linked to the rising cost of living, cited by 43% of respondents. A further 24% attributed increased borrowing to rising insurance premiums.
According to the index, 6% of respondents who used credit for insurance payments had defaulted on repayments in the past year, a figure unchanged from the previous index. Looking ahead, 7% expressed concern they may default in the next 12 months.
Credit cards remain the most common form of borrowing for insurance payments, used by 41% of consumers. Finance provided by insurers or premium finance firms followed at 29%. This compares to 35% and 25%, respectively, in last year’s findings.
The index also reported increased credit use across various types of insurance. The proportion of adults using credit for car and home insurance rose to 56% each, up from 48% in 2024. Use of credit for life insurance increased to 34% from 29%, while pet insurance rose to 30% from 27%.
Travel, health, and critical illness cover also saw small increases in credit usage. Credit use for specialist insurance, such as boat or horse cover, remained unchanged at 8%.
Mona Patel (pictured bove), consumer spokesperson at Premium Credit, said the number of people relying on credit to pay for insurance continues to rise, with monthly payments becoming a common strategy to manage affordability.
“Spreading the cost of an annual policy into more convenient monthly payments is hugely helpful for many millions of UK consumers,” Patel said. “It can also be a good alternative to other forms of credit like credit cards or bank overdrafts.”
The research also underscored the potential financial impact of inadequate insurance. Among those who used credit to pay for insurance, 8% had been unable to claim in the past five years due to lack of cover or insufficient cover. Of those, 62% faced losses of £1,000 or more that went uncovered.
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