One easy way to save money on your life insurance premium is to pay the premium on an annual basis versus a monthly basis.
While it can be hard to swing it in your budget initially, paying premium
s on an annual basis could result in thousands of dollars of savings over the life of the policy.
Below is a snapshot of the pricing difference between paying annually and monthly for a 40-year-old, male non-smoker.
A 40-year-old, male non-smoker applying for $1,000,000 of Term 10 coverage would pay the following:
The price would be $54.45 monthly or $653.40 over the 12 months, but the price annually would be $605.00 a year, a savings of $48.40 annually.
A 40-year-old, male applying for $1,000,000 of Term 20 coverage would pay the following:
The price would be $99.45 a month or $1,193.40 over the 12 months, while annually the person would pay $1,105 a year, which translates to $88.40 in annual savings.
A 40-year-old, male applying for $1,000,000 of Term 30 coverage would pay the following:
$189.90 a month or $2,278.80 over 12 months, but paying annually would cost $2,110 a year and grant a savings of $168.80 a year.
A 40-year-old, male applying for $1,000,000 of 20-pay Whole Life coverage would pay the following:
$1,092.60 a month or $13,111.20 over 12 months, but by paying annually the premium costs $12,140, a savings of $971.20 a year.
Keep in mind that the above analysis is only looking at premiums in the first year. Most individuals are going to keep their policies 10, 20, 30 years or even their lifetime, depending on the type of plan, and therefore, the savings can be very significant over the life of the policy.
For more details on life insurance premiums in Canada and how best to save on premiums, please contact us at 1-866-899-4849 or visit our Term Life Instant Quote Page.
Ami Maishlish makes some good points here
The cost of paying life insurance premiums “monthly” instead of annually works out to 18.595% for most products and for some as high as 34.132%, paid with after-tax dollars (I wonder why that’s not even part of required disclosure to consumers). Viewed from another perspective, just changing from having the premiums paid monthly to annually is akin to a guaranteed return (saving on carrying charges) of 18.535 to 34.132%. The cost of paying life insurance premiums “monthly” instead of annually works out to 18.595% for most products and for some as high as 34.132%, paid with after-tax dollars (I wonder why that’s not even part of required disclosure to consumers). Viewed from another perspective, just changing from having the premiums paid monthly to annually is akin to a guaranteed return (saving on carrying charges) of 18.535 to 34.132% (As a free service to consumers, our firm provides a quick and easy online calculator to calculate these rates at https://www.planner.ca/gen_calcs/modal_pre_cost_rate.htm)
Trent Hamm a well known financial blogger also discusses the issue here https://www.csmonitor.com/Business/The-Simple-Dollar/2012/0924/Pay-annually-to-minimize-insurance-costs
Where can I get more details on the savings on paying annually and I can change my existing policy from monthly to annual.
Thanks Kolos. You should be able to change a plan from monthly to annual. The insurer may requite it’s within a certain number on months from the issue dates