"Insurance customers are borrowing more to cover their insurance payments due to cost-of-living pressures rather than insurance premium increases."
- Mona Patel - Premium Credit
Premium Credit’s insurance index has found that 76% of UK adults are using some form of credit to pay for their insurance policies, an increase of 5% since 2024, with the average amount borrowed rising by 26% since last year.
The research found that customers using credit to pay for insurance estimate they borrow an average of £505, compared to £400 in last year’s index and £302 two years ago.
The index, which monitors insurance buying and how it is financed, shows that ongoing cost-of-living challenges are the main reason driving increased borrowing. 53% of those who borrowed more blamed the rising cost of living, double the 26% who pointed to insurance premium increases. Last year’s index showed 43% highlighted the cost of living and 24% pointed to premium increases.
However, 23% said they took on more credit as it is a more convenient way to pay for insurance and improves their money management.
More than half (51%) of those who use some form of credit to pay for one or more insurance policies borrowed more than they had in the previous 12 months, compared with 43% in last year’s index. 39% said they have not borrowed more, slightly down on 42% last year, while just 2% said they had borrowed less.
The areas where credit is most used are car and home insurance, both totalling 56%, which is unchanged from last year.
While the overall results show an increase, the percentage of adults using credit to pay for life insurance monthly actually went down by 1% between 2025 and 2026, decreasing from 34% to 33%. Furthermore, those using credit to cover critical illness dropped by 2% from 14% in 2025 to 12% in 2026. However, there was a 3% rise in people using credit to pay for health insurance, going up from 20% to 23%.
The index found that credit cards remain the most popular form of borrowing despite the potentially high cost. Around 55% rely on credit cards compared to 41% last year.
The research also shows that relying on credit cards and other forms of unsecured borrowing is potentially risky, with 11% who used credit to pay for one or more insurance policies saying they had defaulted on repayments during the past year, nearly double the 6% in last year’s index. Around one in eight questioned said they had been turned down for credit cards in the past two years.
Premium Credit’s research found nearly a third expect their financial situation will worsen over the next 12 months, compared with 19% who expect it will improve and 38% who believe it will be unchanged. Around 11% did not know or would not say.
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"Insurance customers are borrowing more to cover their insurance payments due to cost-of-living pressures rather than insurance premium increases," Mona Patel, consumer spokesperson at Premium Credit, said.
"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."
