Most of the insurance company now advertise – ‘Life Cover of 25 lakhs for premium only Rs.11.8 per day’ or ‘Life Cover of 25 lakhs for premium only 354 per month’. This is a marketing gimmick, if they change the above line to ‘Life Cover of 25 lakhs for premium only 4248 per annum’ then probably most consumer think twice before selecting it. Most of us keep affordability in mind before selecting the premium paying mode, so normally go for monthly or quarterly mode. But do you know annual premium mode is the cheapest mode, yes it is.
Premium Saving in Annual Mode
Lets discuss with an example – Mr. Vinit Kumar, age-28 Years, non smoker, looking to buy term and money back insurance plan for 30 years and 25 years respectively, for Sum Assured of Rs.50,00,000.
Example 1 – Company – Life Insurance Corporation of India
Product Name – New Money Back Policy (Term – 25 Years)
Product Type – Money Back
|Total Premium Paid for 25 Years (Premium Paying Term)||697500||663100||652800||642475|
|Total Saving Over 25 Years (Premium Paying Term)||-55025||-20625||-10325|
Example 2 –
Company – Life Insurance Corporation of India
Product Name – Amulya Jeevan (Term – 30 Years)
Product Type -Term Plan
|Total Premium Paid for 30 Years (Premium Paying Term)||486540||477000|
|Total Saving Over 30 Years (Premium Paying Term)||-9540|
Looking at the above comparison premium table(example -1), which shows premium rates for various payment modes – monthly, quarterly, half-yearly and yearly; here we can see following three points –
- By opting yearly premium paying mode, we are saving around 8.56% or Rs 2,201/- in premium amount v/s monthly premium paying mode.
- If we invest this saved money (Rs 2,201/-) in bank every year than we will get Rs.128002/- after 25 year (with 6% yearly compounded).
- If we invest this saved money (Rs 2,201/-) in PPF account every year for 15 years than we will get Rs.64543/- after 15 year.
- Total Premium paid during complete policy term for 25 year would be; Monthly (Rs. 55,025, more than yearly mode), Quarterly (Rs. 20,625, more than yearly mode), Half Yearly (Rs. 10,325, more than yearly mode).
So next time you buy a life insurance cover, select yearly premium paying mode.
Frequently Asked Questions –
Can I change the current premium paying mode of my existing policy?
Yes, for more info please contact customer care of your insurance company with your policy number or your Insurance Advisor.
Is there any charges for change in the premium paying mode?
It all depend on the insurance company. LIC won’t charge any charges for changing the premium paying mode.
Is it valid only for term plans?
You can change premium paying mode for all the plans. Obviously, not for single premium plans.