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Should I pay my life insurance premiums annually or monthly?

How to decide how often to pay your life insurance premiums.

One of the decisions you’ll have to make when buying a life insurance policy — after you decide how much coverage you need, what provider to go with, and who your beneficiaries are — is how often you’re going to pay your life insurance premiums.

Annual and monthly payments are the most common options that life insurance policyholders choose, and they each have their advantages. But which one is right for you?

Read on to find out:

How life insurance premiums work

As with other types of insurance, your life insurance premium is the cost of purchasing the policy. It’s the payment that keeps your insurance policy active so your insurance company will do what you’re paying it to do. In the case of life insurance, your premium goes to the life insurance company so that they pay your beneficiaries the agreed-upon death benefit if you die.

When you first buy your life insurance policy, it becomes in force when you pay your first premium payment, and it remains active as long as you keep paying the premiums. If you stop paying your premiums, the policy will expire at the end of the grace period following your next payment’s due date. Annual and monthly are the most common ways to make life insurance premium payments, but you can usually choose to pay premiums on a few different schedules:

  • Annually – once a year
  • Semi-annually – twice a year
  • Quarterly – four times a year
  • Monthly – twelve times a year

If you want to get an idea of what the annual and monthly premiums are for your specific situation, we can help you quickly and easily get life insurance quotes.

Paying premiums annually vs. monthly

There is no wrong way to pay your life insurance premiums. The most important thing is that you make your premium payments to your life insurance company on time and that you don’t let your policy lapse. But there are good reasons to pay monthly, and good reasons to pay annually:

Top reasons to pay your life insurance premium annually

1. You get a discount Most life insurance companies will offer a discount if you pay annually. Here’s why: It costs more for the insurance company when a policyholder pays premiums monthly, because the administrative costs are higher. Like most businesses, life insurance companies also prefer to have money in hand rather than money incoming, and it’s worth it to them to incentivize you to pay upfront.

So how much can you save? That depends on the insurer, but the discount for paying annually is generally between 2% and 8%. (See the table below for annual payment discounts offered by the top life insurance companies.)

2. You only have to think about life insurance once a year With an annual payment plan, you can write a check (or set up automatic draft) once a year and not think about life insurance for another 12 months.

Top reasons to pay your life insurance premium monthly

1. You can spread the cost of the premium out over time Sure, it’s nice to save on your premium, but there are a lot of reasons you may opt not to. You may not reliably have the cash on hand to pay annually, so the ability to spread the payment out over time is a benefit.

2. It may fit into your budgeting style better Most people pay most bills on a monthly basis: mortgage or rent, utilities, gym memberships. Adding another monthly bill can be easier for many people just because it’s what they’re used to doing.

Should you pay your life insurance annually or monthly?

One of the most important aspects of being fiscally responsible is to make sure your money isn’t working against you. That means avoiding things like unnecessary fees and cost increases. If there isn’t a penalty for paying monthly, then you can make your decision based on your available funds and what will make a bigger headache for you: paying a lot at once or a bit throughout the entire year.

Whether you should pay the premiums for your life insurance policy monthly or annually depends on your individual circumstances, including your income and budget.

The best way to pay your life insurance premium depends on the way you budget and pay bills. That might mean it’s easier for you to add a monthly automatic expense or it could mean that one yearly payment works better.

But if you’re equally comfortable paying annually or monthly, then it makes more sense to pay annually, because that will almost always result in a lower premium due to the annual payment discount. After all, you’re getting the same coverage. Why should you pay more for it?

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How affordable is term life insurance?

Get your free quotes and compare term life policies from the nation’s top companies.

Which life insurance companies offer discounts for annual payments?

All of the top life insurance companies offer some discount for paying annually, ranging from 2% to 8%. Our life insurer reviews can give you a full picture of the top-rated life insurance companies rates, including each company’s annual payment discount.

Further reading

What does life insurance cover?

When will life insurance pay out, and when will it not? Learn what scenarios are covered by your policy.

Read

What are life insurance premiums?

Premiums keep your policy in-force. Learn how they're determined and how you can lower them.

Read

What are life insurance riders?

Customize your policy and get additional benefits and protection with must-have riders.

Read

Why life insurance isn't an asset

Life insurance protects your family's financial future - but should you consider it an investment?

Read

Disclaimer: Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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