Monthly vs Annual Premium Payments for Life Insurance | Coomes Insurance & Financial Services

When you purchase a life insurance policy, you will typically be given several different payment options for your premium. For term life insurance policies, almost all companies will offer a policyholder the option to pay either monthly, quarterly, bi-annually, or annually. What some consumers may not realize is that the life insurance companies will charge a different annual rate (insurance companies refer to it as a modal factor) on your premium depending on which payment option you choose.  

As a rule of thumb, the more payments you’re making towards your annual coverage, the higher your total annual premium will be. In other words, choosing to pay your premiums monthly will cost you more than it would to pay in one annual sum.

Here is an example of a top rated insurance company’s different modal factors for a term life insurance policy.

Mode:          Modal Factor:             Cost of $1000 premium
Annual                     1                                      $1,000 Semi Annual        0.53                                    $1,060 Quarterly              0.27                                   $1,080

Monthly               0.095                                  $1,090