Car insurance, don't you just love it! You have no choice but to buy it, it cost you a fortune, and every year it gets more expensive. You see nothing back in exchange for a, unless you are unlucky enough to be involved in an accident, in which case you may, if you have picked a good reputable company, be able to walk away without too much personal expense, but you may also find yourself involved in a long battle with your insurers to get them to pick up the bill. It's a subject that we could get quite upset about, but there it is, like taxation we just have to grin and bear it, and pay up!

Sadly, it isn't quite as simple as that for growing number of people because premiums have gone up and up year after year to such an extent that for a large proportion of the population the cost of buying an insurance policy or of renewing one has become something that they dread. A large and growing number are finding that they simply cannot afford to pay their insurance when it falls due.

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Insurance companies have not been slow to recognise that there is some advantage to them here, and so at first clients were allowed to make monthly repayments subject to a substantial deposit in advance, and then recently the rules have been relaxed even more to allow a situation under which the premium is divided by 12, and this figure becomes the monthly payment with the first one settled by credit card, lost meaning that the customer does not have to find any deposit initially from his or her own bank account or savings. The issue of a deposit is quite important; in law, at least in the UK, any form of contract has to be accompanied by what is called a consideration, which in the case of a car insurance contract means some money has to be paid upfront. Insurers get around this problem by taking the initial payment from the buyers credit card company, who then of course claim it back from their customer after a month or so.

This is all well and good but there is a considerable drawback that paying insurance in this manner is more expensive than paying it via a conventional, paid up front policy. Some companies in fact charge quite considerably more, which may seem somewhat unfair but the fact is that insurers have traditionally made a great deal of their income from investments and in order to do that they need to have the premiums from their clients as quickly as possible. If the client only pays monthly, it will be a full year before that client has paid in full. In between, they or any of the other clients of the insurance company's may put in substantial claims and taken to an extreme this could mean that the insurance company could run short on liquidity, which is something which is governed by statute. Hardly surprisingly then, insurers do feel completely justified in charging interest and/or management fees for clients who wish to pay monthly.

It has to be borne in mind that there are other alternatives to buying a full 12 months policy, particularly if the buyer is short of ready cash. It is possible to buy car insurance on a rolling month by month basis, or even a short-term policy lasting for as little as one single day. Obviously, these types of policies will not be suitable for every insurance buyer but it is as well to know that they exist.