Is it better to pay premium monthly or yearly?

However, you should know that paying the entire annual premium in a single lump sum has benefits. You'll usually receive a lower rate than you would if you paid it monthly. Even if your mortgage lender allows you to make monthly payments, when you can pay the premium in full, the savings can be significant. Monthly premium payments can also provide you with more liquidity and purchasing power.

You can invest the money you would have spent on an annual payment in assets that can generate higher returns than those offered by a permanent life insurance policy. Experienced investors should weigh the return on their policy against other investment strategies, such as mutual funds or stock options. Paying insurance premiums annually is almost always the cheapest option. Many companies offer discounts for the full payment, as the insurance company pays its premiums on a monthly basis, as this requires manual processing every month to maintain the policy active.

Your advisor receives a lump-sum compensation or commission when the premium is paid annually, compared to for a 12-month period when you pay monthly. Because of this difference, most counselors will recommend an annual payment when paying an insurance premium. You usually pay 6 to 8% more to pay monthly premiums than to pay annually. Even semi-annual premium payments are usually 3% to 4% higher than payments annually.

Good financial planning involves ensuring the highest possible amount of guaranteed profits and a guaranteed return of 6 to 8% is something that I will be happy to guarantee every day of the week for my clients. So why is this only recommended and implemented up to 5% of the time? If you can't pay your full-year insurance premium up front, most insurance companies now allow you to pay the premium with a monthly payment plan. To ensure a higher total annual premium, some financial advisors or insurance agents may have recommended that you pay your insurance premium on a monthly basis. Ultimately, you want to find a payment method for your car insurance that creates a balance between meeting your personal preferences and saving you the most money while providing you with the car insurance protection you need.