Annual Premium Payment Mode
Annual premium payment mode is the yearly frequency of premium payment under a life insurance policy. The frequency at which the life insured choses to pay the premium continues for the entire policy term.
A life insurance policy is to protect the financial interest of the life insured. A policyholder chooses the policy after evaluating the premium paying capacity. Depending on their capacity, the insured further choses the payment mode as per their convenience.
When the life insured agrees to make regular yearly payment for the complete policy term, the policy is said to have annual premium payment mode.
If you choose an annual premium payment mode then it may save you some premium amount as compared to monthly premium payment mode.
Ravi bought a term plan worth Rs.1 crore when he was 21 years old. To avoid missing the premium payment date, he chose the premium payment frequency as regular, that too, yearly. The total annual premium paid by him under the term plan will be Rs.9629/- (including GST) when the policy term chosen is 39 years. If Ravi had chosen monthly regular pay, the premium paid by him would have been Rs.867/- monthly (Rs867X12= Rs.10,404). The insurance company charges a higher premium when the premium is paid in monthly mode.Back