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Anonymous
How come annually premium is cheaper compare to monthly for insurance and endowment plan?
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Tan Siak Lim
12 Apr 2021
CFP. Director, Financial Advisory Group at Financial Alliance
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Chris
11 Apr 2021
Owner and Writer at Tortoisemoney.com
If you pay the premium annually (at the start of the coverage period), the insurance company will have more time to generate returns on your money. As such, they don't need 'as much' to generate their required return. However, if you only pay monthly, at the start of the period, they only have 1/12 of the money to work with to generate returns on. Hence, the higher premium amount helps them to compensate for lowered returns.
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Premium are also calculated annually, for example, see your car insurance. If you pay monthly, it's considered an installment, and it's not interest free.