Payment Mode: Most insurance companies allow you to choose from the following payment modes:
Annually
Semi-annually
Quarterly
Monthly
There are some things to consider when selecting payment mode:
Annually is actually less expensive in the long run. Although you pay the entire amount up front, over the course of a year you will pay less. The reason is that insurance companies build in a 'factor' for modal premiums to cover their cost of billing administration. For example, assume your annual premium is $1,000.
- Annual premium = $1,000. Annual cost = $1,000.
- Semi-annual premium = $520. Annual cost = $1,040.
- Quarterly premium = $265. Annual cost = $1,060.
- Monthly premium = $87.50. Annual cost = $1,050.
* All numbers are hypothetical. Actual modal factors vary by company.
* Monthly payments can be made by automatic deduction from your checking or credit card (if available) account. In fact, if you choose monthly payments, it is a requirement. Almost all insurance companies require automatic deduction for the monthly payment mode. Although this option does not appeal to everyone, it can be a convenient way to budget for and pay your premiums.