Important! What you should know before you renew your insurance (4/5) : Paying in installments
Renewing your 1st class car insurance soon?
When you see prices that are too good to be true, be careful! A few baht saved up front could result in a major cost to you if an accident should happen. The purpose of this series will be to share with you what to look out for to ensure you get the most out of the car insurance that you buy from Carpool or from any broker/insurer.
Isn’t being able to pay in installments a good thing?
Installment payments are now becoming a norm and that’s a good thing because it allows a once (large) one-time expenditures to be broken down into more affordable monthly payments. With that said, there are two things that you need to watch out for:
In many cases, the financing cost will make your insurance more expensive, and the longer the financing period, the more it will cost you. Even if brokers claim to provide 0% finance, they usually have a ‘cash price’ which is lower.
There are really two types of installment payment plans that we’ve seen offered by brokers: those which use the credit line of your credit card (which we like) and those that are financed by the broker and don’t need a credit card (which you should be careful about)
Why is this important?
When you choose to pay in installments using your credit card, the bank typically charges the broker around 0.8% per month, so if the broker offers an installment plan of 10 months, the total financing cost is 8% to the broker. This cost is typically relayed to you in terms of a higher price when you pay as installments (to check how much, simply multiply the installment amount by the number of months and compare with the cash price). When you see a broker offer you 0% financing, be wary – if the installment price is higher than the cash price, part or all of the financing cost has been charged to you.
But financing costs are a fact of life and still makes sense if paying the premiums in one lump sum is inconvenient for you.
What you should really be careful about are the brokers that offer you installment payments without requiring you to use a credit card. When you choose an installment plan using a credit card, the insurer is being paid in full via the credit limit granted to you by your credit card company. This means that you are covered for the entire period of the insurance policy – even if you are unable to pay the installment or pay late.
This is an entirely different story when you use an installment plan without a credit card. In this instance, the broker is taking money from their own pockets and paying the insurer on your behalf. To ensure that you pay the broker back, they hold onto your insurance policy and will cancel your policy if you are unable to pay or pay late. Unlike the previous example, this means that you no longer have coverage. This is not to say that all brokers do this, but if you choose this type of financing, make sure you ask your broker how they treat late or delinquent payments.
Carpool helps good drivers save money without compromising on coverage
At Carpool, we believe that good drivers should enjoy peace of mind that you get from comprehensive coverage and still save money too. With our innovative peer-to-peer car insurance offering, good drivers can enjoy up to 30% cash back each year off of already competitive 1st class car insurance premiums. To learn more, please visit us at www.carpool.co.th