More on Life Insurance
More on Life Insurance
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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 work with, and who your beneficiary will be — is how often you’re going to pay your life insurance premiums.
Your life insurance premium is the cost of purchasing your policy and keeps your policy in force. Annual and monthly payments are the most common payment frequencies, though some insurers allow you to pay premiums semi-annually or quarterly. Each has its advantages — annual payments save you some money, but monthly payments are more budget-friendly.
Annual premium payments usually have a 2-5% discount and monthly premium payments can be as low as $20
Semi-annual and quarterly premium payments have little-to-no advantage because you are paying a large lump sum with no discount
Though you get a discount with annual payments, it’s better to pay monthly if you can’t pay the full amount up front
Monthly premiums are paid once a month, on the date of your billing cycle. While splitting up the premiums is better for some budgets, missing payments can risk a policy lapse. Annual premium payments mean that you only pay one lump sum to your insurer each year. That comes with a few key advantages, including fewer payments to track and a small discount.
Monthly vs. annual premiums at a glance
|Monthly premium payments||Annual premium payments|
|Payments per year||12||One|
|Best for||Someone who finds it easier to budget month-by-month||Someone who can afford to pay a large sum once per year|
Methodology: Premium payment amounts are calculated for a non-smoking 35-year-old male and female living in Ohio who qualifies for a Preferred health class, obtaining a 20-year, $500,000 term life insurance policy. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 11/13/2020.
Whether you should pay the premiums for your life insurance policy monthly or annually depends on your individual circumstances, including your income and budget.
For many, paying a large lump sum each year isn’t ideal. If it’s easier for you to track a monthly expense or you’d have to dip into your savings to pay upfront, there’s no harm in paying monthly premiums. A relatively healthy person in their 30s could pay just $35 per month for a $500,000, 20-year policy.
But, if you’re equally comfortable paying annually or monthly, then it makes more sense to pay annually. Discounts mean you’ll almost always pay a lower premium, generally between 2% and 5% lower, and you’ll only need to worry about a single payment.
Most of the top life insurance companies offer some discount for paying annually, ranging from 0% to 5% for term life insurance policies. Our life insurance reviews can give you a full picture of the top-rated life insurance companies, but these are the approximate annual discounts currently offered by Policygenius’ partner insurance companies.
Life insurance premiums are typically paid on an annual or monthly schedule, but you are often given the option to pay semi-annually (twice per year) or quarterly (four times per year) as well. However, most people are better off choosing monthly or annual payments.
Because there’s no discount for semi-annual or quarterly premiums, you’d be signing up to pay larger lump sums without gaining any additional benefits. But, if you think you might miss monthly payments and can’t make one annual payment, a quarterly or semi-annual payment might be worth trying out.
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Whether you choose a monthly or annual premium payment depends on your budget. We don’t recommend paying semi-annually or quarterly, but if you can make one annual lump sum payment, you could end up saving money in the long-run. If splitting up payments monthly makes more sense for you financially, then the savings from a yearly payment with a discount may not be enough to warrant one large lump sum. And if you choose one payment frequency and decide it’s not right for you, you can make a change by contacting your life insurance provider.
Life insurance pricing varies based on several factors, including the type of coverage you buy, your age, your sex, your medical history, and any risky hobbies you have. Your premium will be unique to your personal profile, but you can use a coverage calculator to get an idea of what you will pay.
Premiums can be paid annually, semi-annually, quarterly, or monthly (i.e., one, two, four, or twelve times per year). Your insurer should explain what payment methods you can use, but most accept checks and electronic bank transfers.
For most people, monthly payments are best since they are easier to factor into your budget, and semi-annual or quarterly payments require larger payments without the benefit of a discount. If you can afford to pay a lump sum upfront each year, paying annually can be cost-effective since many insurers offer discounts on annual premium payments.
Nupur Gambhir is a life insurance editor at Policygenius in New York City. She has researched and written extensively about life insurance since 2019, with specialties in life insurance companies, policy types, and end-of-life planning. Her writing on insurance and finance has appeared on MSN, The Financial Gym, and end-of-life planning service Cake. Previously, she worked in marketing and business development for travel and tech.
Amanda Shih is a life insurance editor at Policygenius in New York City. She has a passion for making complex topics relatable and understandable, and has been writing about insurance since 2017 with specialities in life insurance cost and policy types. She's previously written for Jetty and LegalZoom.
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