Insurance customers borrowing more than £500 to cover premiums, study finds
The average amount consumers borrow to pay for insurance premiums has risen by 26% over the past year, according to research from Premium Credit.
The average amount consumers borrow to pay for insurance premiums has risen by 26% over the past year, according to research from Premium Credit.
Its latest Insurance Index found customers using credit to fund insurance payments now borrow an average of £505, up from £400 a year ago and £302 two years ago.
The research also found that 76% of insurance customers use some form of credit to pay for at least one insurance policy, unchanged from last year but up from 71% in 2024.
More than half (51%) of those using credit said they had borrowed more over the past 12 months than they had previously, compared to 43% a year ago.
Cost of living pressures were cited as the main reason for increased borrowing, with 53% of respondents pointing to rising household costs.
This compared to 26% who blamed higher insurance premiums.
A further 23% said borrowing more was a convenient way to manage their finances.
Credit cards remained the most popular method of funding insurance premiums, used by 55% of those borrowing to pay for cover, up from 41% last year.
The study found car and home insurance were the products most commonly paid for using credit, with 56% of customers spreading the cost of each policy.
Usage also increased for travel insurance, rising from 23% to 28%, and health insurance, up from 20% to 23%.
The research highlighted potential risks associated with unsecured borrowing, with 11% of those using credit to pay for insurance saying they had defaulted on repayments in the past year, up from 6% in the previous survey.
Mona Patel, consumer spokesperson at Premium Credit, said: “Insurance customers are borrowing more to cover their insurance payments due to cost of living pressures rather than insurance premium increases.
“However, it is notable that substantial numbers who are borrowing more are doing so because paying for insurance monthly is more convenient and better for their general budgeting in line with how they pay for other products and services.
“Premium finance is specifically designed to help smooth out the impact of a single lump sum and improve cash flow.
“Spreading the cost of an annual policy into more convenient monthly payments works for many millions of UK consumers and businesses and it can be a good alternative to other forms of credit like credit cards or bank overdrafts.”
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