What is insurance premium fractionation?

Just as many stores allow their customers to pay in installments for products such as appliances, mobile phones or computers, some insurers also allow the option of splitting the insurance payment. In this way, instead of paying at once the premium of your policy, which can be a high amount, policyholders can pay it monthly, quarterly or semiannually.

What to consider to split the policy payment

Premium fractionation is only a form of payment, so insurers are not required to admit it in their policies. If you are looking to split the payment of your insurance it is essential that you make sure that the company agrees to divide the premium into several installments, since not all of them allow it and others only allow it in certain products, such as Car and Home insurance or under the fulfillment of certain requirements. In addition, it is also important that you look at the surcharges that companies will impose on you for paying the annuity in installments since not all have the same interests.

Another of the points that must be taken into account when splitting the insurance payment is the minimum amount that the insurer will impose. Normally, a limit is established to fractionate the insurance and if yours were below, the company would not allow you to benefit from this payment method.

Pros and cons of instalment payment

The cheapest option to pay the insurance premium is to make a single payment. However, some people cannot afford to pay in one go, so they choose to do so in instalments. Therefore, the fractionation of the insurance premium allows you not to assume the disbursement of a large sum of money but sometimes increases the final cost, since the insurer can impose interest.

For example, if the policy premium amounted to EUR 600 and it was decided to make three payments, with an interest of 10%, each payment would amount to EUR 220 and the final price would be EUR 660. This extra cost will not always be the same and will depend on the insurer with which you contract the insurance.

Obligation to pay all insurance contributions

The insurance premium, with some exceptions, is an annuity and paying it in several installments is a possibility of payment that can be given to you by insurers. But assuming the cost of insurance in several monthly payments does not mean splitting the contract. Therefore, when making the contract, you have the obligation to make all payments agreed with the company. Even if you suffered an accident with the car and it was irreparable or you sold it to someone else, you would have to continue paying the fees that were pending.

Fractionation in the CCS

Some insurances such as car, motorcycle or home allocate a percentage of the total premium to the Consorcio de Compensación de Seguros (CCS). The entity charges a part of the product to generate a fund with which compensation is paid in special cases in which the companies do not guarantee compensation against certain claims.

When opting for the fractionation of the insurance price, the entities can also divide the percentage of the premium that goes to the Consortium. In this case, the payment can be distributed among the monthly payments chosen by the policyholder, but will have certain interests in favor of the Consortium. If a semiannual premium payment is chosen, they will be 2%, if quarterly, 2.5%, 3% if it is bimonthly and up to 3.5% if it is monthly.

On the other hand, if you choose to split the premium but do not want to divide the surcharge to the Consortium, it is charged on the first receipt of the premium, which will be higher than the rest.

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