Insurance companies are raking in an additional £544million a year from motorists who choose to pay for their premium on a monthly basis according to new research.

The study from comparison website Go Compare found that on average a driver paying monthly will add 11.83 per cent to the overall cost of their insurance. That works out at around £55.36 on an average policy, though some younger drivers can be stung for as much as £257.

The additional costs do vary across different insurance companies, some going as high as 17 per cent of the total cost, while other can charge as little as 6.8 per cent.

Ironically those who choose to pay monthly are often the ones most in need of savings as the research shows that 47 per cent who choose to pay monthly are on lower incomes.

Lee Griffin of Go Compare urged drivers to check the small print on their policy when comparing to make sure they are fully aware of the additional charges associated with paying monthly.

“Car insurance is always cheaper when you pay one annual payment, but drivers who can't afford to do that are hit by additional costs,” he said.

'The added danger here is that people paying monthly are statistically more likely to renew again with the same insurer, without checking the total cost.

“It can become a cycle of paying more, for people who can least afford to do that.

“We know that hassle is a big factor behind why people don't switch.

“People paying monthly may see having to cancel a direct debit and set up a new payment as an additional hassle.

“Equally, if you pay a smaller amount monthly, you are likely to be less price-sensitive than if you were to pay the full amount in one go.

“At the very least, you need to check what your insurer is charging for monthly payments and if you are with an insurer that charges 17 per cent extra for monthly payments, it is going to be well worth shopping around for a better deal,” Griffin added.

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