Save Money on Life Insurance by Paying Annually
Stumble It!
Digg It!
Tip It!
del.ico.us
FacebookHere’s a quick tip for saving money on your life insurance policy… Pay the premiums annually if at all possible. Most insurers give you the option of paying monthly, quarterly, semi-annually, or annually. But guess what? Paying more often than once per year typically costs more. While insurers typically don’t disclose the effective annual rate of this additional payment, which is essentially interest, you can figure it out yourself using this calculator.
Take, for example, a $360 term life insurance policy. Let’s assume for the moment that the monthly payment option requires twelve payments of $32. That’s just two bucks extra per month… Totally worth it for the added flexibility, right? Well, if you do the math, that two bucks works out to an APR of 14.3%! That’s a pretty steep price to pay in order to avoid paying your premium up front.
As it turns out, it’s just this sort of billing practice that got Zurich Direct into hot water last summer. As a result, we ended up receiving a whopping $2.52 from the settlement even though we always paid for our policies annually.
Published on May 31st, 2007 - 4 Comments
Filed under: Insurance
email this article
- bookmark it
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
Related articles...
» How to Save Money on Life Insurance» Carnivals – Week of 06/04/07
» How to Save Money on Car Insurance
» How to Save Money on Health Insurance
» Buying Term Life Insurance (Again), Update #4
» Insurance Needs for a Couple with No Kids
» Zurich Direct Life Insurance Class Action Lawsuit
» From the Archives (May 4th – May 31st)
Was this article useful? Please sign up to receive our content via e-mail:
4 Responses to “Save Money on Life Insurance by Paying Annually”
Leave a Reply
Great deals...
Readers’ choice...
Recent articles...
- More on Lending Club's Reduced Interest Rates
- New Home, New Expenses
- Lending Club Reduces Interest Rates for Borrowers
- Save for Retirement With a Spousal IRA
- How to Handle a Missing 1099 Form
- Pursuing Financial Independence: Now What?
- Determining Your Financial Priorities
- Lending Club Update - December/January Performance
- 2010 Outlook for Mortgage Rates
- Reducing Your Automotive Expenses
Most talked about...
- Dave Ramsey is Bad at Math
- $8,000 Homebuyer Tax Credit
- How to Claim the First-Time Homebuyer Tax Credit
- Dish Network Customer Service SUCKS
- $15,000 Homebuyer Tax Credit
- Reduced Credit Limits? Share Your Experience
- Pay Off Mortgage Early? Or Invest?
- Would the "Fair Tax" Gut the Economy?
- $7500 First Time Homebuyer Tax Credit
- Tax Stimulus Rebate Payments to Start Early
- Best Online High Interest Savings Accounts (Updated!)
- Life's Too Short to Drink Cheap Beer
May 31st, 2007 at 1:06 pm
You are absolutely correct! I have seen the discount factor for annual premiums as high as 8% over monthly payments.
May 31st, 2007 at 7:46 pm
A lot of insurance companies have done that practice. I remember paying my car insurance up front because I saved $5 per month on a $70 payment. That’s a nice savings as far as I’m concerned.
Is this illegal now, or is it something that has to be pointed out clearly by the company?
June 1st, 2007 at 11:02 pm
Somebody has to explain the math to this dumb ol’ CFP, but how does an extra $24/year work out to 14.3% on $360? I pulled out the HP 12C and I figure the 2 bucks a month isn’t really a bad deal at all!
June 7th, 2007 at 4:25 pm
Hey dumb ol’ CFP…It works like this: IF the annual premium is $360, but you decide to pay monthly (at $32) all companies would require the first month in advance, this means that you are “financing” the other $328 over 11 months. His APR of 14.3% is right on the money. (not a good deal) I’m a believer in life ins to protect my family, not a believer in paying rates comparable to a credit card to break it down monthly.