Here’s a little money saving tip if you are looking to get your life insurance plans anytime soon (this tip is also applicable if you are currently paying your insurance premiums every month) and the insurance plans include those of Whole Life, Term, Endowment Plans and not do not include those Investment-Linked Plans (ILPs).
And the amount of money that you can save is around two weeks of your monthly premium and if you are committing to a 10 year policy term… you can do the math and see how much you can really save!
Interested to know more? Read on….
You Get To Save On Your Insurance Premiums When You Choose To Pay Annually!
It is that simple but most clients do not know that! And you get to save around two weeks of your monthly premium if you choose to go on this option. So for example, if you are paying $100 per month… in a year you will be paying a total of $1200 but if you opt to pay annually, you will be paying around $1150 per year which is a saving of $50! And if you are committing to a 10 years plan, that is a total of $500 in savings!
The next good thing is that you can choose to switch back to the original mode (from the revised annual mode back to monthly, quarterly or half-yearly) if you really feel uncomfortable paying so much in advance.
Why Is There Such A Good Deal?
To put it simply… there are administrative and processing charges when you opt for monthly mode – the insurance company has to employ people to make sure that the money is credited properly and their accounting system is updated correctly… and how about the times when you forget to pay for a month and you receive those lovely reminder letters prompting you to pay your premiums? All these are costs.
So to minimize all these unwanted charges… insurance companies would usually prefer that you can opt for the annual mode and in return, they pass on these small savings back to you by making you pay slightly lesser.
Why Am I Paying More When I Convert From The Initial Annual Mode To Monthly Mode?
The difference here is due to the Sum Assured. As mentioned earlier… when you pay $100 per month which is $1150 per year if you opt for annual mode – your sum assured can be $98,000. But if you initially opt to pay $1200 per year, the sum assured can be $100,000 therefore the conversion back to monthly mode will be based on this $100,000 sum assured and not on the $98,000 sum assured.
Why Is This Not Applicable For ILPs?
This is because for Traditional Life Insurance Plans like Whole Life, Term or Endowment Plans, you can paying directly to the Insurance Company which they can have all the say on what to do with that money… Whereas for ILPs, you can buying into a certain Investment Fund and the premium will be used to buy Units which is outside of the control of the Insurance Company.
Lastly… Is This Applicable To Quarterly or Half-Yearly Mode?
The Answer is Yes! But you will not get to enjoy the similar benefit like the ability to save on two weeks which means that you will get to save lesser when you opt for quarterly or half-yearly mode. Reason? As mentioned earlier, this is due to the charges and fees for processing the premium received.
I do hope this little saving tip is beneficial to you!